IT services deals decline 20% in Q2

The number of new outsourcing contracts worldwide dropped by 20% in the second quarter, to 411 from 516 in the same period a year earlier, with contract values also sliding, according to new research.

“The market is growing, but the pace of growth is slowing,” said Salil Dani, an analyst at Everest Group.

The decline in the number of new contracts can be partly attributed to economic factors such as the debt crisis in Europe, Dani said. But organisations in the U.S. are also shying away because the presidential campaign has featured some anti-offshoring rhetoric, he added.

Everest said its estimate is based on publicly disclosed data and includes new transactions as well as renewals. The annualised value of newly reported contracts in the second quarter was $2.3 billion, compared with $2.6 billion in the same quarter last year, the research firm said. (The annualised value is the total value of a deal divided by the number of years it lasts.)

There were 54 deals with total values exceeding $50 million each reported in the second quarter, compared with 61 in the first quarter. That second-quarter figure includes two deals with total values of more than $1 billion each, Everest said. But there are a lot of contracts worth less than $25 million.