One Leap Forward, Two Steps Back for IT Services

The IT services industry experienced a rage as total agreement value (TCV) decreased by a third in 3Q12 to its minimum level in nine years, according to research and advisory firm, Ovum.

The number of private sector deals knocked an 11-year low, with public sector TCV and deal amount at their lowest levels in three years.

In Ovum’s latest research of IT services contracts activity, the international experts reveal that the TCV of IT services deals declared in the three months ending September 2012 was $18.9 billion dollars, down 33% on the same time in 2011.

The level of deals decreased considerably, to 332 from 438 in 3Q11, comprising the least action in a single three-month time in just about five years, since just 324 contracts were monitored during the fourth quarter of 2007.

“The signs of restoration in the IT services industry obvious in the second quarter of 2012 were mostly noticeable by their nonexistence in 3Q12,” said Ed Thomas, senior analyst at Ovum.

“There will need to be a significant recovery in both TCV and deal amount if last year’s performance is to be matched in 2012. On current form, both yearly TCV and the amount of deals are place to hit 10-year lows, as the international financial problems constantly give an impact on the performance of the IT services market.”

Europe taken over the few private industry contract deals that were finalized in 3Q12, while the activity decreased considerably in North America, a marketplace on which many IT services providers depend.

General private sectors TCV was given an air of respectability by two mega-deals (contracts appreciated at $1bn or more) declared by CSC and IBM, yet the quarterly return of $8.3 billion was still the lowest since 2Q11 ($7.1bn).

For the public sector, TCV in 3Q12 was $10.6 billion dollars, down 43% on the similar period of the previous year, while the number of deals monitored by Ovum decreased 22% to 195, with no mega-deals.

Basically as a result of the lack of large projects, the normal value of public sector contracts fallen to $54.6 million, almost half the typical public sector award in 2Q12.

“This sharp dip in activity will destroy any positivity engendered in the past quarter, when an increase in the amount of deals brought to an end seven successive quarters of decrease,” Thomas said.


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