TPI findings, presented in their latest global quarterly report, include:
- Contracts awarded in 2006 represent single-greatest number of agreements in any one year, up 11% from 2005’s previous high
- Trend towards shorter contract durations and smaller contract values continues in fourth-quarter
- Europe signs as many mega deals as the Americas in 2006
In its sixteenth quarterly Index call, TPI reported that 2006 was also a year which marked a record number of contract restructurings -- 72 in total.
In the last quarter of 2006, fewer mega-deals awards at greater than Ђ800M were awarded than in any fourth quarter in the past five years, as predicted by TPI’s third quarter Index call. The large restructurings which made up some of these mega deals (19%) included DaimlerChrysler and T-Mobile.
"2006 was notable for Europe as it recorded the greatest number of contracts ever, but not the largest TCV (total contract value). There are also interesting changes on the mega deal front as we enter 2007; all four mega deals in our transaction pipeline are European based. Indeed the last year has seen Europe sign as many mega deals as the Americas did," said Bernd Schaefer, Area Managing Director, TPI Germany.
The total ACV (Annual Contract Value) of the 157 European contract awards in 2006 came to Ђ4.3B. This compares with 2005’s total European ACV of Ђ5.7B from 142 contract awards. Average contract size in Europe has dwindled from over Ђ35M in 2002 to just over Ђ27M in 2006.
As predicted by TPI in its third quarter Index Call, BPO has played an instrumental role in the uptake in the number of contracts across Europe with increased quarter-on-quarter activity, though at reduced contract values. More BPO contracts (208) were signed for the full year than ever before. In Europe this represents a growth of 56% Y/Y.
In Europe this increased activity is the continuation of the trend of the last five years, which has seen a near doubling of the number of contracts awarded annually. Most significantly, however, it also reflects increased appetite for BPO in the region. Given TPI’s level of activity in Europe as we enter 2007, we see every indication that these trends will continue,” comments Schaefer.
Another theme which TPI has tracked throughout recent Index reports, is that of the impact of contract restructurings on the market. Over the last year, 72 contract restructurings were awarded globally, valued at just over Ђ16B and likewise here only the number, not the value, set a record. Looking ahead, 154 contracts worth over Ђ26B are expected to come up for renewal in 2007 and this level of renewals is expected to continue into 2008.
For the 157 European contracts, 58 service providers signed one or more contracts and 28 signed two or more. Across the board, a record number of providers was recorded in every contract category.
"We have seen converse growth over the last year as contract volume spirals yet value shrinks. The face of the outsourcing market has changed significantly and will continue to do so in 2007, not least because of increasing competition and service provider diversity in the market as well as the trend towards single-process BPO contracts. The leading single-process area in 2006 by volume and value is Financial Service Operations Outsourcing (FSO) and by our predictions, the insurance sector is one to watch in Germany over the coming year," said Schaefer.
www.tekrati.com