The outsource industry turning profits in 2010 could mean that the economic turnaround is genuine and here to stay.
Information Services Group, a Stamford-based information services company and its unit TPI, a sourcing data and advisory company, have released information showing that the global outsourcing market had its best performance in six quarters and that a slow but steady recovery in the industry is underway as businesses commit to long-term strategies to reduce costs and streamline operations.
“As we anticipated, 2009 marked a low point in outsourcing because of the recession in the general economy and its impact on commercial buyers,” said Mark Mayo, partner and president of global operations at TPI.
The fourth quarter 2009 global TPI index, which measured commercial outsourcing contracts valued at greater than $25 million, showed the market’s total contract value reached $24.7 billion, an increase of 8 percent year-over-year and the best quarterly performance since the second quarter of 2008.
Mayo said strong demand for IT outsourcing was driving the market.
“The global market bottomed in the first half of the year and turned in the second half,” said Mayo. “It now shows signs of recovering slowly and steadily, rather than bouncing back to pre-recession levels, but the outlook for building on its second-half momentum is positive.”
Mayo said full-year 2009 results could not overcome the market’s weak showing during the first two quarters; total contract value for the year declined to $74.5 billion, its lowest point since 2001.
“However, as 2010 begins, industry pipelines are healthier and more stable than a year ago,” said Mayo.
The company”™s information found among industries, the three verticals with the largest footprint in the outsourcing market were financial services, manufacturing and telecom, and media, which all experienced significant increases in demand during the second half of 2009.
“These three verticals will need to continue their positive momentum if the broader market is to maintain its gradual recovery,” said Mayo.
He said looking ahead, industry pipeline metrics monitored by TPI have strengthened over a year ago, as have anecdotal descriptions of the health of service provider pipelines. The rate of new transactions added to pipelines, which had slowed in 2009, seems to have stabilized, and the level of contracts coming up for renewal is up 29 percent.
“As businesses becoming more confident in making strategic decisions, we are seeing promising signs for the global outsourcing market,” said Mayo. “All in all, we sense that the worst is behind us and expect a return to growth in 2010.”
