Article

Gartner averages values of IT outsourcing contracts

Ed Parry, News Editor

Gartner analysts have been poring over a pile of IT outsourcing contracts, 1,055 to be exact, some of them with dust dating back to 1989. And after crunching some numbers, the Stamford, Conn.-based research firm has come up with some averages that will give you and idea of the nature of the outsourcer/outsourcee relationship.

The average value of an IT outsourcing contract -- $47 million.

Average duration of a contract -- six years.

Percentage of contracts worth less than $100 million -- 54%.

Monster deals worth $1 billion or more -- 9%, but they represent two-thirds of the total value of the contracts.

Financial services and central government have the most billion-dollar megadeals going according to Gartner's research (17), while high-tech industries accounted for seven of those big deals.

Gartner found that the aerospace and defense industry had the most valuable annual contracts among vertical industries, with an average annual value of more than $88 million, followed by the auto industry ($87.4 million), and high-tech ($80.5 million).

"Tracking IT outsourcing contracts over time can yield useful information. Knowing what companies and outsourcing providers have and have not done in the past can help identify pockets of expertise, as well as pockets of opportunity," according to Bruce Caldwell, principal analyst for Gartner's sourcing group.

In other words, if you're mulling your outsourcing options, those are some

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figures to keep in mind.

Gartner's figures come from publicly disclosed contracts from more than 190 IT outsourcing vendors and 14 industries from all over the planet.

Last month, analysts brought up another outsourcing figure -- the amount of money some firms are wasting on bad outsourcing deals. Western Europe businesses, according to the most recent data, wasted more than $9.5 billion on outsourcing last year.

Gartner says the investments became money pits because companies signed deals to save money in the short term and didn't pay enough attention to the long term and had trouble coping with change. Expensive reviews, re-done deals and abandoned contracts were the most draining aspects of those deals.

FOR MORE INFORMATION:

Outsourcing snafus -- two big ones companies make

Why outsource? Ask the 'Y'

Ten criteria for offshore outsourcing

Best Web Links on outsourcing


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