Date:11/08/2005 URL: http://www.thehindubusinessline.com/2005/08/11/stories/2005081102900400.htm

Back Fewer, smaller IT, BPO deals during June quarter: TPI

Our Bureau

Bangalore , Aug. 10

SOURCING advisory TPI's quarterly index shows a11-per cent rise in global contract award values in the second quarter of 2005 compared to the first quarter of 2005, but both numbers and values of the contracts are down compared to the same quarter a year ago.

The quarter witnessed a total of five deals each worth at least $50 million with a total valuation of $15 billion.

In the first half of the current year, the industry concluded 112 transactions worth $28.5 billion, a 13 per cent decline in value for the first half of the previous year.

Both BPO and IT deals have shrunk in volume and deal size - this is more likely a feature of the current half and could witness a change in the next couple of quarters, said Mr Siddharth A. Pai, Partner and Managing Director, TPI India.

"Our TPI pipeline indicates the seven mega deals ( more than $1 billion) - with a total anticipated value of $13 billion - are likely to be concluded in the next couple of quarters."

TPI also finds a marked increase in contract restructurings during the quarter, accounting for 22 per cent of this year's contract awards to date in both volume and value.

"Overall contract values and numbers of transactions for BPO remain sluggish but HRO is still showing marked growth in this segment of the sourcing market," said Mr Thomas J. Sebastian, Advisor.

For the first half of 2005, HRO is the largest segment in BPO in terms of total contract value and most buyers are US-based firms with more than 10,000 employees.

Certain HRO providers are winning large workforce administration contracts - Hewitt won six of the ten recently announced wins, according to TPI.

Indian pure play companies are very much on the radar for TPI-advised contracts, said Mr Pai, adding that even if these companies did not win the whole deal, they might get parts of them.

However, global service providers are quite often able to compete on cost as well as other considerations with the Indian providers by offering India-based delivery as a part of their solutions, even getting better rates out of centres such as Brazil or the Philippines, he added.

"Even when the G-2000 companies choose to go with multiple providers, the Big 6 are getting the deals 81 per cent of the time," Mr Pai said.