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IT Outsourcing Continues Apace, Despite Recession

Network Services segment has been particularly strong, accounting for about half of the major outsourcing deals in 2009, research shows.

Even IT outsourcing is suffering during the current difficult economic downturn, according to a report issued Tuesday by outsourcing advisory firm TPI, which said the number of outsourcing awards fell 7.5% from the first quarter to the second quarter to a total of 135.

The TPI Index, which follows commercial outsourcing contracts of $25 million or more, found that the market in the first half of 2009 had 11% fewer contracts with 22% lower total contract value than for the like six-month period in 2008.

"The first half of 2008 was extremely strong for the outsourcing industry, which makes year-over-year comparisons tough," said Mark Mayo, partner and president of TPI Global Resources Management, in a statement. "In addition, over the past six months, companies have been more tentative and tactical about making sourcing decisions as they try to navigate these challenging economic times."

Mayo said some very early signs of stabilization are showing up in information technology outsourcing in the U.S. "which gives us some encouragement that we may be seeing a bottom to the current slump."

Additional encouraging signs were reflected in IT outsourcing demand that is increasing in some vertical markets including telecom, diversified financials, transportation, and retail sectors. The steady IT outsourcing market has tended to stabilize the broader market, TPI said, adding that the Network Services segment has been particularly strong, accounting for about half of the major deals and relationships to date in 2009.

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