Executive Briefings

Large Contract Restructurings Lifted Outsourcing Market in First Quarter

Contract restructurings, in which clients renewed, renegotiated or expanded existing contracts, lifted the global outsourcing market during the first quarter of 2010, according to data released by TPI, a unit of Information Services Group.

The 1Q10 Global TPI Index, which measures commercial outsourcing contracts valued at $25m or more, recorded total contract value (TCV) of $19.5bn, up 25 percent from the first quarter of 2009. Contract restructurings accounted for 42 percent of TCV, far surpassing the previous record of 29 percent set in 2006.

An analysis of TPI Index data indicates, however, that the market is continuing to recover at the slower pace it began in the middle of last year. TPI anticipates restructuring activity will continue at an above-average level for the rest of 2010 but is unlikely to account for as high a percentage of TCV as more new-scope contracts are added to the pipeline.

Among vertical industries that have historically been critical to overall outsourcing market success, manufacturing increased its TCV by 69 percent, while financial services TCV slipped 18 percent. Surprisingly, the travel, transportation and hospitality vertical led all industry sectors with its best-ever TCV of $5bn, more than quadrupling results from a year ago. Leading the charge were contracts awarded by a U.S.-based airline, a European logistics company and the French railway SNCF. 

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Contract restructurings, in which clients renewed, renegotiated or expanded existing contracts, lifted the global outsourcing market during the first quarter of 2010, according to data released by TPI, a unit of Information Services Group.

The 1Q10 Global TPI Index, which measures commercial outsourcing contracts valued at $25m or more, recorded total contract value (TCV) of $19.5bn, up 25 percent from the first quarter of 2009. Contract restructurings accounted for 42 percent of TCV, far surpassing the previous record of 29 percent set in 2006.

An analysis of TPI Index data indicates, however, that the market is continuing to recover at the slower pace it began in the middle of last year. TPI anticipates restructuring activity will continue at an above-average level for the rest of 2010 but is unlikely to account for as high a percentage of TCV as more new-scope contracts are added to the pipeline.

Among vertical industries that have historically been critical to overall outsourcing market success, manufacturing increased its TCV by 69 percent, while financial services TCV slipped 18 percent. Surprisingly, the travel, transportation and hospitality vertical led all industry sectors with its best-ever TCV of $5bn, more than quadrupling results from a year ago. Leading the charge were contracts awarded by a U.S.-based airline, a European logistics company and the French railway SNCF. 

Read Full Article