FEATURE
Fashions in outsourcing change constantly - and the megadeals which were a hallmark of its early development have been replaced for many organisations by a more nuanced approach. But that doesn't mean the giant deals are gone forever.
Certainly as the recession began to bite, outsourcing megadeals - those of $1bn or more - started to decline. Research published in late 2008 - when the credit crunch first began to make itself truly felt - found there was one quarter where just a single megadeal was signed, while the value of outsourcing contracts across the board fell by two-thirds quarter-on-quarter.
And there's no doubt that some of that reluctance to sign megadeals was spurred by the economy, as traditionally outsourcing-friendly sectors such as financial services and manufacturing saw profits tumble and therefore IT spending did likewise.
"Typically you're looking at 12 to 15 [megadeals] a year around the world. We did see that drop down quite dramatically for a year or so, and a lot of that was driven by the cloud of uncertainty that descended across the globe," Duncan Aitchison, EMEA president of outsourcing consultancy TPI, told silicon.com.
Outsourcing megadeals are no longer the default for UK companies
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"These kind of undertakings, by their definition, are big and they normally represent quite a strategic move for companies as they've got a significant amount of commitment attached to them. When you're in a period of quite dramatic uncertainty, organisations - quite logically - are less willingly looking at significant change programmes until they start to get some sense of what the future will look like," Aitchison added.
And it's not just the struggling sectors that have strived to push deal values down: even those who aren't suffering are expecting lower quotes from their suppliers - John Torrie, UK CEO of outsourcer Steria, told silicon.com: "There were customers who were doing very nicely and still got very aggressive about cost reduction... they realised their position and would come into meetings and say 'if you don't do something about this [price], we will reconsider'."
But while the ebb and flow of megadeals has tended to echo the ebb and flow of companies' financials, the maturing of the outsourcing market in countries such as the UK and US has a large part to play in seeing wallet-busting deals fall out of fashion.
The megadeals of yesteryear were typical of companies coming...
