TPI, the sourcing data and advisory firm, announced that the global outsourcing market experienced its strongest third quarter on record. However, results would have been substantially more muted without a handful of large contracts between telecommunications companies.

The Q309 Global TPI Index, which tracks commercial contracts valued at $25 million or more, recorded one-hundred and thirty-nine transactions during the just-completed quarter with a total contract value (TCV) of $24.7 billion. It was the highest quarterly TCV since the fourth quarter of 2008 and represented an increase of twenty-one percent over second quarter 2009 and forty percent over third quarter 2008.

However, excluding five transactions in which telecommunications carriers outsourced network operations to telecommunications service providers, TCV reached only $17.2 billion, roughly in line with the slower pace of the past four quarters. The market's year-to-date TCV of $62.6 billion remains 10 percent below the same point last year with the Telco-to-Telco contracts and twenty-three percent lower when they are excluded.

Mark Mayo, Partner and President, TPI Global Resource Management commented: "The outsourcing market's record third quarter wouldn't have been possible without a small number of significant Telco-to-Telco contracts." He continued, "Nonetheless, even without those deals, the TPI Index showed solid sequential improvement in TCV, steady demand for IT outsourcing, considerable growth in Asia Pacific and the best showing for mega-deals in more than a year."

The TPI Index results where as follows:

Overview:

In the third quarter of 2009, Network Operations Outsourcing accounted for $7.5 billion of TCV. This is more than thirty percent of the broader market's value. The impact of that activity was isolated in the IT outsourcing (ITO) segment. The TCV of the ninety-four ITO contracts awarded in the quarter reached $20.1 billion, a fourteen percent jump from the prior quarter and the highest total since the fourth quarter of 2003. When Telco-to-Telco contracts are excluded, however, TCV was flat with the second quarter and is down 12.6 percent year-to-date.

Demand for business process outsourcing (BPO) remained lacklustre in the third quarter as companies found it easier to pursue ITO contracts in the current economic climate than pursue large transformations of their Finance & Accounting or Human Resources functions or the Facilities Management and Financial Services Outsourcing deals that were popular last year. Year-to-date, BPO TCV is down forty-five percent compared to the same point in 2008 and the number of contracts is off twenty-five percent.

Regions and Industries:

The research showed significant differences in outsourcing market performance by region of the world. Asia Pacific awarded twenty-four contracts valued at $6.4 billion, a second consecutive strong quarter for TCV in the region and the third out of the last four in which it topped $5 billion.

In the Americas, forty-seven contracts valued at almost $12 billion were awarded in the third quarter, up sequentially more than one-hundred percent on the strength of Telco-to-Telco activity.

In Europe, the Middle East and Africa, sixty-eight contracts valued at $6.5 billion were signed in the third quarter, up modestly by number but down about 4 percent from the same quarter a year ago.

Outlook:

Mr Mayo explained:"The third quarter showed an unprecedented surge in Telco-to-Telco contracts and continued stabilisation in the rest of the market, and this occurred in a quarter that is seldom the best quarter of any given year." He continued, "Our day-to-day observations suggest that pent-up demand underlies a market that has been deferring decisions in an economic recession. Based on this, we think the market will begin to turn upward over the next six to nine months."

More information and presentation slides are available.