On one day – on January 19, 2006 – as many as four outsourcing deals were announced, totaling more than $500 million involving four different vendors.
The biggest of them was an IT contract bagged by Indian tech company HCL from UK-based specialist electric retailer, DSC International in which the Delhi based vendor would take over the entire IT organization of DSC. Reportedly worth $330 million (HCL has not officially announced the size of the deal), this is the biggest single contract bagged by an Indian company so far.
HCL’s Delhi-based neighbor Genpact, the erstwhile GE subsidiary, also announced a $60 million contract with German tech group Linde to provide finance and accounting BPO services to the latter. While CSC announced a $27 million, 7.5 year contract with Pan American Life Insurance Co. for supporting IT services for the insurance firm’s US and Latin American operations, Injazat Data Systems, an EDS joint venture bagged a 10-year, $110 million IT deal from the Abu Dhabi Water and Electricity Authority (ADWEA).
January 19 saw a peak of four contract announcements. But the month by and large has seen a spurt of outsourcing contracts, with more than a dozen big and medium contracts being announced.
While IBM’s $1.1 billion, 10-year contract with Gap Inc. to provide mainframe, server, network, helpdesk and desk-side support services across the retailer’s North American stores and corporate locations led the pack, other big contracts of the month include EDS’ two high profile contracts – a 10-year IT outsourcing contract with United Airlines and a multi-year IT contract with Sprint Nextel. The New Year has started quite well for EDS for sure.
Convergys’ customer service contract renewal with DIRECTV, one of its top three clients and Unisys’ IT contract with Countrywide Finance were the other noteworthy deals.
Europe is now giving North America a run for its money when it comes to new contracts in outsourcing. UK-based bank HSBC’s $442 million document based customer communication contract to Communisis Ltd, and Capgemini’s BPO deal with Zurich Financial and eGovernance deals Swansea Council, were the bigger deals in Europe.
If contracts announced so far are anything to go by, January would be a big month. The year certainly has started well.
Is it safe to conclude that there is a renewed interest in outsourcing?
Probably, yes. But January may not have been the beginning.
The trend may have actually started earlier. According to outsourcing advisory firm, TPI, the last quarter of 2005 saw a spurt in outsourcing contracts, especially of the bigger variety. The firm said six mega deals were awarded in this quarter, with five in December alone. Total mega-deal value for the quarter was US$11.2B, representing 40% of the full year’s mega-deal value.
The renewed interest is good news for outsourcing. The last quarter performance notwithstanding, the year 2005 was a particularly bad year for outsourcing. Contract cancellations made more headlines than new contracts. Also, in terms of large deals, with a total contract value of less than US$27 billion, the year recorded the lowest annual TCV in the large-transaction category since 1996.
And in case you’ve forgotten, GM CIO Ralph Szygenda has to unveil the details of the company’s “third generation” outsourcing contract that all of us have been waiting for months.
