Has outsourcing become passe?

Just when you thought outsourcing was hot, hot, hot, a report released today says that the number of computer outsourcing deals fell for the third quarter.

The report by TPI Inc., which claims to be the "world's first and largest sourcing advisory firm," says that the outsourcing market could drop by 10 to 15 percent this year.

The report does not address government at all, as far as I can tell, but it is interesting.

Third-quarter results indicate an expected decrease of 10 to 15 percent in total dollar value for outsourcing contracts awarded in 2005, to US$60 to $65 billion from an average of US$72 billion awarded in recent years. To date, the year's total contract value (TCV) is US$43.8 billion for transactions signed in the Americas (US$21.3B), Europe (US$20.3B) and Asia (US$2.2B), compared to a global total of US$52 billion this time a year ago.

"The decline in outsourcing transaction value is due to several factors," stated Peter Allen, Partner and Managing Director, Global Practices, TPI, Inc. "With the exception of HRO, BPO has not grown as quickly as some had expected. Firms are increasingly taking advantage of offshore service delivery, reducing the TCV of contracts. TCV is also sluggish because of reduced capital intensity and shorter terms in ITO contracts."