An IDC study of the top 100 outsourcing deals in 2004 reveals fundamental changes in the outsourcing marketplace, including a dramatic shift to more business process outsourcing (BPO), an increase in the number of players, and a reduction in total deal value. These developments reflect increased competition and expansion in the marketplace, and create pressure for traditional outsourcers to alter their business models in order to successfully compete in the coming years.

The value of the top 100 outsourcing deals in 2004 decreased by 1.2 per cent from $69.1 billion in 2003 to $68.3 billion in 2004. However, qualifying for the top 100 in 2004 required a minimum deal value of $184 million, a 5.1-per cent increase from 2003. The study also found that the share of BPO and processing services deals in the top 100 outsourcing deals increased from 15.2 per cent in 2003 to 25 per cent in 2004, while the share of IT outsourcing services suffered a decline to 75 per cent of the 2004 market.

"The world of deal making for large outsourcing contracts in 2004 saw a slight decline in signings by total value, a reduced number of megadeals valued at $1 billion and higher, an increase in the number of players competing in this segment, and a shift to more business process outsourcing deals as part of the mix," said David Tapper, director of IT Outsourcing, utility, and offshore services research at IDC.

"These shifts, along with other key trends in the market, such as customer need to lower costs and increase productivity, are creating fundamental changes in the outsourcing marketplace. In order to compete, players need to radically alter their business models to include newer service capabilities, involve different ecosystems of partnerships, target ''non IT'' opportunities, and seek new customers in the SMB and consumer spaces as well as emerging markets."

The study found that the number of players participating in the top 100 deals increased from 26 in 2003 to 34 in 2004. While just three players captured 55.6 per cent of the contract value for the top 100 deals in 2003, seven were needed to reach roughly the same amount (55.9 per cent) in 2004, with IBM leading the way followed by CSC, EDS, Atos Origin, HP, Accenture, and Fujitsu.

Geographically, the value of deals captured by Asia / Pacific (APAC)-based contracts, though still small, showed a jump from 0.7 per cent of total deal value in 2003 to 3.9 per cent in 2004. Europ-r, Middle East and Africa (EMEA)-based players, as determined by headquarters, increased their take of these deals from 21.7 per cent in 2003 to 38.9 per cent in 2004, while Americas vendors saw a decrease from 76.7 per cent to 56.3 per cent during this same period.

The study, IDC''s Top 100 Worldwide Outsourcing Deals of 2004 provides an overview of the top 100 world-wide outsourcing contracts of 2004, ranked by total contract value, and examines the trends and characteristics of outsourcing contracts signed in 2004 valued at $184 million or more. The study presents the outsourcing contract winners, outsourcing contracts by vendor headquarters, contract values, contract lengths, quarterly view, geography, and industry. IDC gathered information for this report from the outsourcing vendors themselves, vendor web sites and other industry sources.