At last, some realism is leaking into the market; fetid and rank it may be, but like all good boils, this one really needs lancing.
The latest research from TPI does not make happy reading for the outsourcing service provider and sourcing advisory/consulting communities. The message is simple; information technology outsourcing (ITO) is in the dolrums and business process outsourcing (BPO) has fallen off a cliff.
Providers have returned woeful results. Total contract values (TCVs) for deals worth at least USD25m were down 22 per cent during the first six months of 2009, compared with H1 of last year. In addition the number of signed contracts was down 11 per cent, with only 135 contracts awarded during the last quarter.
BPO deals have declined across all regions and all functions; finance and accounting and particularly human resources have been hardest hit. The value and number of BPO contracts were at their lowest levels since 2001. In fact, at USD2.4bn for Q2, TCVs were down 69 per cent compared to the same period last year.
Let’s put this in context. In order to match the figures for 2008, the outsourcing service providers will need to sign deals with TCVs in excess of USD53bn. Hands up all those that think that this is a probable outcome?
So, we have all of the service providers with clogged pores, pressure building inside until we see such an expulsion of people last seen in the heavy industries in the 1980s.
What should we do, pack up, stay indoors and hide our faces until clients arrive back with ready supplies of Clearasil?
Well, I say lance the bugger!
The medicine is easy to administer, the pain short-lived and the opportunities are better for a glowing complexion afterwards. What are the medicines in my opinion? I’ve discussed cloudsourcing recently and we urgently need to go back to “what clients want and need – not what we think they should want and need”.
The sooner we do this, the better the prognosis.