IT Sourcing Europe highlights the major findings of the 2Q10 Global TPI Index, a key measurement of the global commercial outsourcing contracts value.
According to the 2Q10 Global TPI Index, the second quarter of 2010 faced the total contract value (TCV) of $18.1 globally, down about 13% both sequentially and year-over-year. The European ITO market is reported to have exhibited particular softness in 2Q10.
For the first half of 2010, global market TCV of $38.9 billion remained flat with a year ago following the unprecedented surge in contract restructurings during the first quarter. In the second quarter, restructurings accounted for 20 percent of TCV, in line with historical trends.
Despite the sluggish market, innovations such as Cloud Computing are beginning to influence the approach companies take to their service-delivery strategy. According to Mark Mayo, Partner and President of TPI Global Operations, although the global outsourcing market continued to recover slowly and quite unevenly in the second quarter, the corporations still continue to look to outsourcing to improve their critical business operations and enable important innovations such as Cloud Computing.
In keeping with the uneven recovery, the 2Q10 Global TPI Index found significant variation across the market.
By region, the Americas saw second-quarter TCV decline 9 percent over the first quarter of 2010 but increase 21 percent over the second quarter of 2009. In EMEA, however, quarterly TCV fell both sequentially and year-over-year, 21 percent and 14 percent, respectively. In Asia Pacific, TCV increased 5 percent sequentially in the second quarter but dropped 73 percent year-over-year.
By scope, ITO TCV during the second quarter fell nearly 30 percent sequentially and 23 percent year-over-year. First-half ITO TCV of $29 billion, fueled by the large contract restructurings of the first quarter more than by second-quarter performance, rose 5 percent over the year before.
Finally, by industry, the Global TPI Index found declining activity in Financial Services, Manufacturing and Telecom & Media. These three sectors are as critical as ever to the outsourcing market, and their relative sluggishness restrained overall market growth in both the second quarter and the first half of the year.
In contrast, the Travel, Transportation and Hospitality industry saw impressive gains for the second straight quarter, and the Retail sector, with four successive halves of growth off a small base, remained another industry to watch, as retailers continue to experience top-line revenue pressure and pursue cost reductions from sourcing.