IT services market receives boost in Q4: Ovum

Large contracts help to reverse three quarter slump

A number of lucrative deals at the end of last year helped the Asia Pacific IT services market beat three quarters of decline in total contract value (TCV), according to a report from Ovum.

The IT services contracts quarterly analysis Q4 2010 report identified contracts in the Asia Pacific region bought in US$2.6 billion, a 25 per cent increase from Q4 in 2009. The final quarter result drove TCV across the region to over $9.5 billion. However, this was still down on overall 2009 results when $15 billion worth of contracts were signed.

Global deals produced during the quarter amounted to 448 with a value of $49.1 billion. The analyst firm attributed this figure not only to the number of deals signed but the services market slowly emerging from the global financial crisis. This was a contrast to August 2010 when global TCV slumped to $30.9 billion.

Applications, networking and hardware integration were highlighted as areas of the IT services market which contributed the most to these deals.

Australia was a benefactor of the Asia Pacific fourth quarter surge in contracts with a number of services companies signing significant deals in 2010.

For example, UXC (ASX: UXC) landed two public sector contract wins with the Victoria WorkCover Authority and the Transport Accident Commission. One of the deals was valued at A$50 million [artnid: 374392| according to discussions during its financial earnings presentation in November|new]].

ASG Group (ASX:ASG) won A$220 million worth of new business last year, including a seven-year contract to provide services to VHA, a nine year deal servicing arrangement with the Department of the Prime Minister and Cabinet, and a $13 million deal with the Communications Ministry.

Asia Pacific IT services analyst Jens Butler said in a statement that based on his data, Australia contributed $200 million to the total of $2.6 billion.

“It’s difficult to say if the trend will continue into 2011 but there are number of larger deals up for renewal throughout the region," he said.

According to Butler, the increase in deal size may be a sign of the releasing of company purse strings but also warned of an ongoing buying cautiousness.

“This cautious approach may also be due to the more detailed decision criteria being applied to all forms of outsourcing coupled with the prevalence of more mature risk management techniques and greater control over funds,” he said.

Follow Hamish Barwick on Twitter: @HamishBarwick

Follow Computerworld Australia on Twitter: @ComputerworldAU

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