Outsourcing emerges from the recession

Outsourcing demand has nearly reached pre-downturn levels

Companies that delayed outsourcing contracts and cut budgets as the recession hit are signing up for IT projects again, according to new research.

Outsourcing advisory firm TPI tracks commercial worldwide outsourcing contracts valued at €20m (£17.5m) or more.

The firm's latest index shows that the number of companies seeking to outsource IT and business processes surged in EMEA during the fourth quarter of 2009, reaching a total contract value of €12.4bn (£10.8bn). The figure represents an increase of 135 per cent compared with the previous quarter and 61 per cent year on year.

Outsourcing contract value for the three-month period nearly reached the level achieved in the second quarter of 2008, the last quarter before the downturn affected the market.

"The fourth quarter showed clear signs of recovery but, as expected, the recession took a toll on the full-year results," said Duncan Aitchison, EMEA president at TPI.

"The market clearly bottomed in the first half of 2009, but managed to turn in the second half of the year."

The total value of outsourcing projects reached €29.3bn (£25.6m) during the whole of last year, a 21 per cent year-over-year decline.

In the UK, which is the world's second most mature outsourcing market after the US, the value of outsourcing contracts signed was half its 2008 level, TPI said.

The research also showed that the shift to smaller outsourcing deals with multiple providers is continuing. TPI said that over 70 per cent of the contracts studied were for less than €80m (£70m), the highest percentage in EMEA outsourcing history.

Most of the outsourcing contracts signed in EMEA were for IT operations, followed by business process outsourcing.