According to TPI, the Total Contract Value (TCV) of global commercial outsourcing contracts have declined by 5% to $75 billion from $78 billion in 2004 even as the number of deals saw an increase.

TPI, in its latest report, has said that fourth-quarter results lifted 2005 to the highest number of outsourcing transactions ever awarded in the broader market, for contracts equal to or greater than $50 million. A total of 293 contracts were awarded, up from 269 contracts last year.

“The December surge in industry-wide mega deals produced a nice finishing surge for 2005 but was not enough to meet 2004 TCV level and it dipped by 5% year-on-year to $75 billion,” Siddharth Pai, MD, TPI India, said.

TCV for this quarter’s mega deals, transactions valued at $1 billion or greater, were the highest since third quarter 2004. Six mega deals were awarded this past quarter, with five in December alone.

Total mega-deal value for the quarter was $11.2 billion, representing 40% of the full year’s mega-deal value. With less than $27 billion of mega-deal TCV, 2005 produced the lowest TCV in this large-transaction category since 1996, TPI noted.

TPI further added that on an annualized revenue basis, it sees the overall commercial outsourcing market as flat, driven by continued declining growth in IT outsourcing value. “The IT outsourcing market value has been marked by steadily declining, single-digit growth rates in the past few years. If such trends continue, we predict that 2006 and 2007 will witness the first years of absolute decline in overall revenue derived from commercial IT outsourcing. However, a healthy growth rate for annualized revenue is projected for BPO at between 10% and 15% in 2006,” Pai noted.