By John Keppel, Partner & President, Information Services
Earlier today, we held our 2Q11 Global TPI Index conference call, during which we discussed noteworthy trends in the sourcing market during the second quarter and the first half of the year.
Compared with the previous second quarter, the second quarter of 2011 offered some welcome lift in several metrics: Europe, the Middle East & Africa (EMEA) total contract value (TCV) was up by 13%, Asia Pacific TCV rose 55%, and Restructuring TCV grew by 30% year-over-year. However, a poor showing in the Americas’ TCV and fewer large contracts drove down the global market by 18%. Despite weakness in the big picture for the quarter and at the half, we anticipate stepped-up second-half activity that will find the market finishing the year at or near typical levels.
It is worth remembering that second quarters are typically weak in comparison with first quarters; that said, our analysis reveals that:
- TCV, at about $16.4 billion in the second quarter, represents about 20% quarter-over-quarter, year-over-year and year-to-date decreases for each comparison. A downturn in large contracts above $500 million, as well as declining values in the Americas and in IT outsourcing (ITO), largely account for these drops.
- Restructurings TCV, while up Q/Q and Y/Y, dropped a substantial 44% when compared to the significant restructuring recorded in the first half of 2010. Despite this YTD decrease, Restructuring TCV now falls within more normal historical ranges. New scope TCV in the second quarter declined by Q/Q, Y/Y and YTD measures alike.
- For the regions, the Americas TCV fell 27% Q/Q and about 50% both Y/Y and YTD. EMEA TCV, nearly twice that of the Americas for the second quarter, grew 13% Y/Y and 10% YTD. In Asia Pacific, a small quarterly drop tempered otherwise ample Y/Y and YTD gains of more than 50%.
- By scope, ITO, at $11.5 billion for the quarter, still made up more than two-thirds of the global market, but dropped about 18% in value both Q/Q and Y/Y, and by 27% YTD. The market is not awarding the large infrastructure contracts of earlier periods. Business process outsourcing (BPO) TCV dipped for the quarter, but thanks to a strong first-quarter showing, half-year comparisons held firm.
- Despite these lackluster results, we believe the second half looks more promising. We note activity building in all three regions, supported by the $7 billion Atos/Siemens restructuring mega-deal already boosting third-quarter values in EMEA.
A replay of today’s call will be posted within 24 hours on TPI.net, where you can also view the presentation slides. I hope you’ll have a chance to listen and sound off with your own perspectives in the comments section below!
(UPDATE: The audio replay is now available at TPI.net).