Offshore IT Services Vendors Score Major Contracts Wins in Q3, Says Datamonitor and Everest Group

Datamonitor tracked a total of 432 deals during Q3 2005, which represented a 1% decline from the year-ago period. However the value of deals fell by 32% from $41.9bn in Q3 2004 to $28.5bn in Q3 2005, with the average contract size declining from $95.7m in Q3 2004 to $66m Q3 2005. The main reason for this was that the number of billion-dollar deals announced over Q3 2005 (four), was half the number tracked during Q3 2004.

Nick Mayes, Principal Analyst for Global Computing Services at Datamonitor, noted: 'Overall, this has been a major quarter for offshore sourcing. Large corporations such as ABN AMRO are dealing directly with offshore services vendors, and are signing deals worth hundreds of millions of dollars with them. Global IT sourcing models are gaining mainstream acceptance.'

One of the other areas of outsourcing which Datamonitor tips for strong growth is finance and accounting (F&A) outsourcing, and there were a couple of interesting deals signed in this space during the third quarter - notably, Accenture's contract with National Australia Bank to run some of its accounts payable functions from a center in Bangalore.

However, Everest Group notes that while IT giants such as Accenture and IBM currently dominate the F&A outsourcing market (FAO), they are increasingly being challenged by Indian offshore providers. While Accenture and IBM have 32% and 29% respectively of the total number of deals signed in the last six quarters, Genpact and WNS Global Services are gaining market share, and have won 12% and 5% of deals respectively.

Second-tier and offshore IT services vendors scored some landmark contract wins during the third quarter of 2005, according to Datamonitor and Everest Group. Indian suppliers Tata Consultancy Services and Infosys Technologies, and second-tier international vendors including Keane Inc and Pomeroy Computer Resources, all secured their largest-ever contract wins during the quarter. Datamonitor says this reflects the growing trend for client organizations to work with a number of best-of-breed, specialist suppliers to manage specific areas of their IT infrastructure.

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