TPI predicts decrease in IT deal values this year

Elite (ronweb@gmail.com) read the following article
at Cyber India Online (http://www.ciol.com) and requested
a link to be forwarded to you.

Article Title: TPI predicts decrease in IT deal values this year
Article URL: http://www.ciol.com/content/news/2005/105110906.asp

Here is a personal message from Elite:
---------------
TPI predicts decrease in IT deal values this year
BPO deals fell by 42 per cent, with the exception being in HR outsourcing
Priya Padmanabhan
Wednesday, November 09, 2005

BANGALORE: With many global IT services increasing their offshoring operations to provide cost-effective services to customers, this year would see a 10-15 per cent reduction in the value of contracts across both IT and BPO sectors, says technology advisory firm TPI.

Speaking to CyberMedia News, Siddharth Pai, Partner, TPI Inc, attributed this to the dwindling value of BPO contracts. This year, BPO deals fell by 42 per cent, with the exception being in HR outsourcing. � This is the first time in the last four-five years that such a dip is occurring,� he said. The overall annual market size is around $72 billion.

Mega deals (deals worth more than $ one billion) also saw a decline. �But they are not dead yet,� he said. Tracing other notable trends, Pai said that this year, many clients were restructuring and renegotiating their existing contracts.

�Customers are now preferring to go for multiple-vendor deals instead of going with the same service provider, and would like to sign on best-of-breed providers for new deals.�

He said that splitting the deals among various players helped clients maintain �competitive tension� among the service vendors.

According to the TPI index, this year the offshoring component of contracts has grown to 44 per cent from 40 per cent last year. He added that Indian service providers like TCS, Infosys, Wipro and Satyam were getting more visible both in terms of winning bigger value deals and number of contracts. He cited the recent ABN-AMRO deal as an example.

However he also warned that most Indian service providers doing mere lip service by saying they are global. �Indian service providers need to expand not just in India but in other geographies as well. This is important because the global top tier service providers are now providing a choice of offshoring locations such as Latin America, Eastern Europe and Philippines, for their customers,� he said.

Pai said that the Indian service providers would need to replicate the offshoring capabilities built in India across other geographies. He predicted that Indian players would adopt inorganic and organic strategies in the coming years to get a better global footprint.

TCS' recent acquisition of a Chilean BPO is a step in that direction. �Today it is just not labor arbitrage that's driving offshoring. There are other factors such as being in the similar time zone (as in Brazil) as the US customer, and cultural affinity and language (which matter a lot in Europe),� Pai said.

He also said that the next 18 months would see an increase in offshoring.
---------------

Do you want to receive FREE weekly Information Technology updates by email?
Sign up for our newsletters at http://www.ciol.com/newsletters/subscribe.asp

Cyber India Online
India's #1 IT Portal
http://www.ciol.com