Outsourcing’s Popularity Confirmed: Total Value of Top 100 Contracts Reaches $228 Billion from 1997 to 2001, IDC Reveals
FRAMINGHAM, MA – APRIL 1, 2003 – The popularity of outsourcing in recent years has been driven by a number of factors, including companies' need to focus on core competencies, reallocate internal resources, and reduce or stabilize costs and improve efficiencies in a highly volatile, highly competitive global business environment. According to a new study published by IDC, companies have also looked to outsourcing as a way to stay at the forefront of rapidly advancing technology and gain access to skilled IT talent.
IDC has tracked signed outsourcing contracts since the mid-1990s, conducted a thorough analysis of the top 100 outsourcing deals (by total contract value) each year since 1997, and analyzed five years' worth of top 100 contract data for its new research study. Among the key findings presented in this study are the following:
Although the average length of the top 100 deals from 1997 through 2001 is seven years, the majority of these deals run either five or 10 years in length.
The tier 1 vendors (IBM Global Services, EDS, and CSC), companies with a wide scope of outsourcing service capabilities, vast geographic reach, and a target market that includes the "big" deals, won 53% of the top 100 deals from 1997 to 2001.
The United States has been the most active country in terms of outsourcing activity, with U.S. companies and government agencies in accounting for a full 45% of the top 100 deal signings from 1997 to 2001.
The government and manufacturing sectors were the most active in terms of signing big outsourcing contracts, accounting for a full 37% of the top 100 deals signed between 1997 and 2001.
The total value of the year's top 100 largest outsourcing contracts more than doubled from 1997 to 1998 and has remained relatively stable since then, ranging from a high of $57 billion in 2000 to a low of $41 billion in 2001. The drop of $16 billion in total value of the top 100 outsourcing deals from 2000 to 2001 may be due in part to a temporary migration away from large, full-service outsourcing engagements to smaller, discrete outsourcing and managed services engagements, brought about in part by the downturn in the economy, corporate misbehavior and poor financial results, and companies' resulting reluctance to hand over large parts of the IS infrastructure to a third-party service provider.
"Historically, outsourcing activity has been strong in regions such as the United States and Western Europe and in verticals such as government,manufacturing, and financial services. Looking to the future, spending on outsourcing services is expected to increase worldwide as companies contend with economic factors such as recession, globalization, privatization, deregulation, and technological innovation. These factors have increased competition in many industries and regions across the world; to remain competitive, many companies outsource as a way to reduce or stabilized costs,
focus on core competencies, increase efficiencies, refocus critical resources, and keep up with rapidly advancing technologies." said Cynthia Doyle, program manager of IDC's IT Outsourcing and Utility Services research program.
This IDC study, The Big Deals: Trends in Top 100 Outsourcing Contracts, 1997-2001 (IDC #28877), presents an analysis of the top 100 largest outsourcing contracts (by total contract value) for the years 1997 through 2001 as gathered by IDC. The document analyzes five years' worth of top 100 contract data in a number of ways, including by value, length, winning vendor, geography, industry, and client company size. Comparisons across years are made and information is summarized to give readers a clear understanding of trends in outsourcing activity over the five-year period.
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