TPI has released research predicting that the number of outsourcing contracts awarded globally will rise in 2010 as organizations look for new ways to optimize critical business operations in an improving economy.
The growing acceptance of cloud computing, increasing interest in multi-sourcing, and emerging focus on governance and risk management will fuel outsourcing contract volume this year, according to predictions contained in the new TPI Momentum Market Trends & Insights 4Q09 Annual Report. However, the Report notes, these same factors will narrow the scope of individual outsourcing projects, driving down their value and duration and intensifying competition among service providers.
The Report also notes that 422 outsourcing contracts valued at $15 billion are expected to expire in 2010, a 40% increase over the total contract value of last year’s expiring awards and the highest level in five years. Many are large contracts signed when the global economy was stronger that will be broken up and awarded in smaller transactions, providing another boost to contract volume this year, TPI predicts.
The TPI Momentum Market Trends & Insights 4Q09 Annual Report uses the unique market data and fact-based observations gathered by TPI advisors and researchers in the past year to provide guidance and strategy for 2010. It identifies the trends and transactions that will shape the outsourcing industry going forward, not only documenting spending levels and contract awards by region and service line but also identifying the client motivations and service provider strategies behind them and offering advice for market participants.
Through its Pursuit Effectiveness Research, TPI is able to analyze contract award trends to understand what separates winning and losing service providers. For example, while pricing is always a prominent factor cited by buyers, it became significantly more important in last year’s recessionary environment based on ratings of winning service providers’ strengths, the Report notes. Also ranking high among winners’ strengths were terms, stability, strength of existing relationship, and technology & tools, all reflecting clients’ desire for tactical solutions that deliver reliable, low-risk savings.
TPI also found that only slightly more than one-third of outsourcing proposals directly met buyers’ objectives in 2009, down from nearly half the year before. While no service provider would intentionally fail to respond to a prospective client’s needs, proposals frequently fall short or reflect misguided attempts to fit an existing solution into the buyer’s problem, the Report notes. Meanwhile, proposals that meet all of a client’s requirements have twice the chance of winning as those that deliver on only some, though the latter often aren’t eliminated until much later in the process and after significant investment by the service provider in the pursuit