Large IT Outsourcing Mega-Deals an Infrequent Occurrence in 2008, According to Everest Research Institute

Business Wire, Dec 13, 2007

Competition for Contract Renewals Will Drive Pricing Lower for Buyers

DALLAS -- A fewer number of Information Technology Outsourcing (ITO) mega-deals will occur in 2008, according to the Everest Research Institute. A decline in the number and size of mega-deals, defined as contracts of $1 billion or more in total contract value, will instead result in a focus on existing mega-deal renewals and an increase in price competition by suppliers, according to a new study by the Institute.

"A decline in mega-deals is likely irreversible any time soon as few Fortune 100 companies remain that could sign new mega contracts," said Ross Tisnovsky, Vice President of ITO Research at Everest Research Institute. "Next year, we expect buyers will gain pricing benefits due to the pressure suppliers will have to grow signings and contend with increased competition for contract renewals. In the large enterprise market segment, comprised of Fortune 1000 companies, we also foresee long-term price decline in the Infrastructure Outsourcing (IO) market due to an influx of new suppliers and increased competition where the most opportunities for ITO exist."

The Institute study, How Structural Changes in the ITO Market are Likely to Affect the Industry, analyzed the market from the client point of view to study how buyer-driven structural changes will affect the ITO market. The analysis examined the three basic ITO market segments: mega-deals, large enterprises, and small and medium business (SMB).

In addition to conclusions about a mega-deal decline, key findings of the study include:

* Relationship consolidation in large enterprises segment will present multiple improvement opportunities to buyers, enabling them to benefit from lower governance overhead and better prices.

* Labor arbitrage will continue to be a significant driver of value in ADM (application development and maintenance) and will continue penetrating Infrastructure Outsourcing (IO), resulting in increased competitive intensity and price pressure

* Increased market velocity (i.e., shorter durations and faster contract renewal cycles) will present buyers with more opportunities to renegotiate contracts and consider alternative suppliers.

* Despite multiple initiatives by numerous suppliers to expand into the SMB market, this market segment is likely to remain underserved and continue to be serviced by smaller suppliers with limited capabilities.

To read more about the results of the Information Technology Outsourcing Market Update study, an extract of the report is available at www.outsourcing-center.com. To purchase the report or receive more information about other research services, please e-mail info@everestresearchinstitute.com or call 1-214-451-3110.

About Everest Research Institute

Everest Research Institute (www.everestresearchinstitute.com) serves as a central source of independent and objective strategic intelligence, analysis, and actionable insight for leading corporations, service providers, and investors in the global outsourcing and offshoring marketplace. The Institute addresses both business process and information technology sourcing topics, providing the global outsourcing and offshoring community with information that empowers highly productive, sustainable sourcing strategies and relationships. The Institute's distinguished Board of Advisors, senior executives and thought leaders oversee the Institute's research agenda to ensure that it fully supports the business needs of corporations, service providers and investors.

Everest Research Institute members receive access to unparalleled analytical and advisory services, including access to Everest analysts, in-depth reports on major outsourcing and offshoring topics, white papers on market-shaping events, and Webinars designed to provide insight and information about important market trends. The Institute's wealth of knowledge and experience provides members with unique perspectives into today's marketplace and the competitive edge required to take advantage of emerging opportunities.

Everest Group is a global operational strategy consulting firm with offices in such leading business centers as Dallas; Gurgaon, India; London; Amsterdam; New York; Toronto and Melbourne. An industry leader since 1991 when we created the sourcing consulting category, Everest Group has earned a worldwide reputation for ongoing innovation as we help clients achieve maximum value from their operations, which includes sourcing strategy and implementation. Everest created the Everest Research Institute (www.everestresearchinstitute.com) as the central source of industry information. Please visit www.everestgrp.com and www.everestresearchinstitute.com for more information.