Outsourcing bombs to six year low

Davey Winder
Thursday, 16 October 2008 16:12

IT Industry - Strategy

Up to now, this year, there is no hiding the fact that outsourcing in the financial services sector has slid downwards as far as both EMEA and the Americas are concerned, while remaining relatively flat-lined for Asia-Pacific.

TPI says that fewer contracts have been signed, and those that were have been of significantly smaller value courtesy of a more limited scope of services and not just a shorter contract duration.

Unsurprisingly, given the global situation, banks have exhibited this particular profile most acutely amongst financial institutions.

According to the TPI Index, the average total contact value of a financial services sector outsourcing contract in EMEA fell by 37 percent to just 107 million Euros this year. While the banks have seen decline of 62 percent in total signed contract valued in EMEA since January, and the insurance sector a 34 percent drop.

The outlook does not look good for the financial services sector moving ahead into 2009 either. Although TPI does expect a "more normal volume of contracts" in the next quarter, it also admits it will take some months for current market reconfigurations to impact upon outsourcing contracts and warns 2009 will probably be a repeat performance of outsourcing contract variability.

TPI does not, obviously, take into account some areas of financial services outsourcing which are booming. Areas such as the Chinese Gold Farming business for example.

Aitchison concludes "Prolonged uncertainty in the financial services sector could dampen or delay decision making about outsourcing, but whether it will spread to other industry sectors is difficult to predict. The outsourcing industry, as a result of the current financial turmoil, will need to adapt to changing buyer circumstances and demands."