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Outsourcing Booms Despite Y2K, Though Europe Slumps.

Outsourcing activity rose to over $51.4bn during the second quarter of 1999, according to figures released by Vienna, Virginia-based research firm Input. The company identified 183 significant contracts during the period, the total value of which was three times above the first quarter level and four times the second-quarter 1998 total of $15.2bn. Of those, 55 were federal sector contracts worth an estimated $27.3bn. However, said Input, even excluding IDIQ (Indefinite Delivery/Indefinite Quantity) federal contracts such as the US Government's General Services Administration Millennia project (CI No 3,570; 3657), total commercial activity of $24bn rose 162% over the first quarter and 232% over the same period last year. Those figures include the cancellation of Electronic Data Systems Corp's contract from the State of Connecticut, which had been valued at over $1bn. Tech Data Corp made the top of the charts with a 12% share of the business, due to the huge contract win it signed in May from GE Capital IT Solutions Inc, said to be worth $2bn in annual incremental revenue over the next three years.

Excluding Millennia (which has been valued at up to $25bn over ten years), Tech Data took a 34% share of second-quarter contract values, followed by Nortel Networks Inc (28%), EDS (25%) and Computer Sciences Corp (13%). Tech Data led the business process management segment, IBM Corp's Global Services division led in electronic markets and insurance, Nortel in network management, EDS in manufacturing, Getronics Wang in banking, Unisys Corp in the state and local government segment and the Sabre Group in transportation. 97% of the contracts were from North America, with Europe down from 11% in the first quarter to just 3%.

Input said that the upturn countered analysts who had expected a downturn in activity due to Y2K fears. It said overall spending remains robust, and companies such as EDS, CSC, IBM Global Services and others are claiming "huge pipelines of business yet to be finalized." San Diego County is expected to award its $1bn contract in September, and the State of Connecticut is restructuring its contracts into smaller units, spread across a wider range of IT vendors.
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Publication:Computergram International
Geographic Code:1USA
Date:Aug 10, 1999
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