While services activity at the beginning of the year is always more sluggish than during the year-end rush to get deals done, this decrease in the number and value of IT and business process services deals was more pronounced than usual. 20 percent year-over-year and 37 percent quarter-over-quarter while BPO values dropped 27 percent year-over-year and 30 percent sequentially. Typically, first quarters sink an average of 13 percent from the previous quarter.
Call it an outsourcing hangover, says John Keppel, partner and president of research and managed services for ISG, which produces the research. The deal of outsourcing contracts in more than a decade, according to ISG, when global total contract value rose 29 percent year-over-year to a record $55.8 billion. And the hangover effect is not without precedent. Buyers took a similar breather in early 2010 and early 2006 after robust late-year signings.
Just one mega deal, valued at $1.5 billion, was inked during this most recent period, although buyers cemented seven of what ISG calls mega relationships -- contracts with an average annual contract value of $100 million or more.
Much of the sourcing activity taking place during the first three months of the year involved restructuring existing relationships. Such activity, which can take the form of renegotiation, extension or contract renewal, rose a dramatic 82 percent over last year.