A Closer Look at Recent IT Outsourcing Contracts

Includes: ACN, IBM, XRX
by: Outsourcing Insider

It was a year ago when analysts were estimating that IT will begin to move back to the U.S. and IT outsourcing to other countries such as India, and China, will wane. But weathering through challenges such as language barriers and political opposition, IT still remains as one of the most viable outsourcing services to date. Just in the past two months, a number of outsourcing deals have come through from major and minor players alike – a testament to the viability of the IT outsourcing business.

On the 1st of June, Xerox company (NYSE:XRX) ACS, and greeting cards giant, Hallmark, signed a long-term IT outsourcing contract renewal. The agreement, slated as a five year extension of an original $230 million, seven year deal between the two companies, is for the continued IT infrastructure and support services of ACS to Hallmark. If you’ll recall, the original ACS-Hallmark contract, which was signed in 2004, had been of particular interest, since ACS had specifically established a Kansas City-based data center for the contract. With the recent renewal of the deal, ACS will still continue with the Kansas data center, as well as establish support offices and facilities in Missouri, Connecticut and other Kansas cities.

Meanwhile, tech giant IBM (NYSE:IBM) closed two deals in the IT outsourcing space. The first deal, which was initially signed last March, was officially announced on the 3rd of June. The deal is with Opus Software Solutions’ subsidiary, ElectraCard Services (ECS) and is a ten year multi-million dollar agreement for providing business continuity services to ECS. This includes management of ECS’ disaster recovery site in Bangalore, and their IT infrastructure in Mumbai, India. The second deal is a five year Integrated Managed Services [IMS] agreement with Indian company, Quippo-WTTIL, and had been initially signed last May. IBM will be providing them with a technical support system for their India operations, including helpdesk and end-user services. The deal was announced on the 17th of June.

Global management consulting and technology outsourcing company, Accenture (NYSE:ACN), in the meantime, signed two IT outsourcing deals in the latter part of July, the first one with the Canadian subsidiary of Sun Life Financial. The deal was signed on the 27th of July and is for the enhancement of the current applications as well as improvement of the insurance company’s operations. The second deal, on the 28th of June, was signed with the European Union, and is for the transition of the European Union into a paperless system dubbed eCustoms, across the whole of Europe by the year 2013.

Other companies who’ve signed IT outsourcing deals these past two months include HCL Technologies (NSE:HCLTECH), who signed a five year, $110 million IT infrastructure outsourcing agreement with the Singapore Exchange on the 14th of June as well as a “mega” outsourcing deal for end-to-end IT services with Saudi Arabia’s Al Majdouie Group on the 11th of July; and Tata Consultancy Services (TCS) (NSE:TCS) who signed a couple of deals in the IT space, including a multi-year outsourcing contract with Telenor Norway (OSL:TEL) to provide application maintenance and development, and an IT deal for the development and implementation of an electronic voting scheme in India.

The IT space certainly looks like it is on its way to recovery, although sourcing data company TPI has reported that the global outsourcing market itself has yet to recover. Total contract value for IT outsourcing deals was down 30% sequentially in the second quarter and 23% year over year, which only shows that, although business is not dwindling, it’s also not anywhere near the “mega” status of old.

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