IDC Releases Detailed Research on Top 100 Outsourcing Deals in 2007, Showing Softening of Megadeals and Decline Across Geographies

FRAMINGHAM, MA – November 24, 2008 – A new IDC study finds that worldwide, the value of the top 100 outsourcing deals decreased by 39.2% from $96.2 billion in 2006 to $58.6 billion in 2007. The number of megadeals – those deals valued at $1 billion or more — also declined substantially in 2007 to 14 from 29 in the previous year, showing what could be some saturation for these larger contracts.

"2007 revealed a substantial softening of the megadeal market, as the percentage of the top 100 total contract value constituted from megadeals declined from 65.1% in 2006 to 34.4% in 2007," said Terrance Strom, research analyst, IT Outsourcing and Utility Services at IDC. "While not declaring the demise of the megadeal, we may in fact be witnessing a cyclical saturation of the market. Service providers will need to continue to invest in lower cost and more flexible delivery models, wisely expand their global footprint, and focus on emerging markets as the source of material growth in the years to come."

Additional findings from IDC's analysis include the following:

* The total value of megadeals included in the 2007 top 100 was $20 billion, a decrease of 68.1% from the $62.7 billion in megadeals signed in 2006. The number of vendors signing megadeals was 11; AT&T, BT, and the Capita Group led the way with two megadeals each.

* In 2007, IBM Global Services (IBM GS) captured $8.3 billion and 14.3% of the top 100 contract spend, followed by BT Group with $6.9 billion and 11.7%, and EDS with $6.2 billion and 10.6%. IBM GS maintained its top position in terms of the total number of top 100 deals signed with 16, followed by EDS with 10 and BT with nine.

* The average contract value in 2007 decreased across every geography with Asia/Pacific and Europe, the Middle East, and Africa (EMEA) suffering the largest declines at 71.4% and 45%, respectively. Americas-based deals also declined substantially at 41.6%, while globally scoped deals showed the smallest decrease of 12.5%.

* For the fourth year in a row, government contracts represented the largest share of total deal value with 27.9% of the top 100 contracts. However, contracts signed in the professional services industry represented the largest average deal size, followed by utilities and insurance. The transportation vertical accounted for the largest year-over-year growth, followed by professional services and utilities.

The IDC study, IDC's Top 100 Worldwide Outsourcing Contracts of 2007 (IDC #214715), now in its 12th year, provides detailed information and IDC's analysis of the top 100 worldwide outsourcing deals for 2007. It also provides an overview of the top 100 worldwide outsourcing contracts of 2007, ranked by total contract value. Using IDC's Worldwide Services Contracts database, this study examines the trends and characteristics of outsourcing contracts signed in 2007. Additionally, the study provides a brief analysis of those trends affecting the outsourcing market as well as guidance on how players can compete most effectively.

About IDC

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