Global outsourcing market data for the first quarter of 2011 shows that restructuring activity has returned to historical norms following last year's record spike, but the value of new scope awarded in the market remained steady, according to TPI, a sourcing data and advisory firm.
The Global TPI Index, which measures commercial outsourcing contracts valued at $25m or more, recorded total contract value (TCV) of $17.5bn during the first quarter of 2011. TCV dropped 28 percent from the first quarter of 2010 and 25 percent over the fourth quarter of 2010.
However, restructurings, defined as contracts that are renewed, renegotiated or restructured, accounted for nearly all of the decline. New scope TCV of $14.9bn was unchanged year over year and declined just 7 percent sequentially.
"In recent quarters, unprecedented shares of global TCV involved restructurings," said John Keppel, a partner at TPI. "That trend reversed itself in the first quarter, as we forecasted it would, but new scope values were right in line with previous periods."
Now in its 34th consecutive quarter, the TPI Index provides a quarterly snapshot of the sourcing industry for clients, service providers, analysts and the media.
Among the highlights of the 1Q11 Global TPI Index was business process outsourcing (BPO), which recorded its second-best quarterly performance in the last two years. Clients awarded BPO contracts with a TCV of $6.6bn, up 66 percent over the same period a year ago and more than twice the prior quarter's tally. The number of contracts awarded also reached its second-highest level since the first quarter of 2009.
By contrast, IT outsourcing (ITO) contract values dropped significantly, driven by the decline in restructurings. However, as with the broader market, new scope of nearly $10bn in the segment was well within range of first quarters historically.
Among the regions of the world, Europe, the Middle East and Africa and Asia Pacific turned in steady performances. Meanwhile, the Americas suffered its third straight quarterly decline, with TCV falling 56 percent year-over-year but up 17 percent sequentially.
"The outlook for the rest of 2011 suggests an industry upswing based on healthy contracting activity and a modest amount of restructuring in the mix," Keppel said. "Overall, we are cautiously optimistic about next quarter and more bullish about the second half of 2011."
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