Even as deals above $500 million in deal value saw a decline in 2005, the top five vendors — IBM, EDS, BT, CSC and T-Systems — consolidated their positions by grabbing 53.5% of the top 100 IT/BPO outsourcing contracts, according to IDC’s annual study of top 100 deals worldwide. In 2004, six vendors accounted for the same share of the market.

This means while the megadeals are on a decline, the buyers still have the faith on the tried and tested big service providers.

The Total Contract Value (TCV) of the 100 worldwide outsourcing deals decreased by 3.1% from $70.1 billion in 2004 to $67.9 billion in 2005. The IDC study finds a reduction in the number of both megadeals and deals ranging from $500 million to less than $1 billion TCV. However, the number of deals with less than $250 million TCV has seen a dramatic increase from eight in 2004 to 23 in 2005.

The study also finds that the number and value of business-outsourcing deals declined in 2005, while the value and number of IT outsourcing deals increased. Within IT outsourcing, the share of network and desktop outsourcing deals climbed substantially from 14.6% of total IT outsourcing deal value in 2004 to 32.4% in 2005.

“The world of deal making for large outsourcing contracts in 2005 saw a slight decline in signings by total deal value — a reduced number of megadeals valued at $1 billion and higher — and an increase in the number of players competing in this segment, ” said David Tapper, Director, Outsourcing, Utility and Offshore Services research, IDC. “These shifts, along with other key trends in the market, such as customer need to lower costs and drive increased productivity, are creating fundamental changes in the outsourcing marketplace that will require players to radically alter their delivery models. They will now need to include more flexible and newer service capabilities along with globally based delivery, develop dynamically different ecosystems of partnerships, pursue “non-IT” opportunities and seek new customers in the small and medium business and consumer spaces as well as emerging markets with entirely new business models. ”

The 2005 study was IDC’s tenth annual study of Top 100 deals.