The outsourcing industry is grow-ing with good spirits internation-ally with a potential to grow further. A large number of contracts were signed during 1999-2000 when the economy was facing a downturn. Hectic activity is being seen in the outsourcing sector as outsourcing contracts worth nearly $100 bn are due for renewal internationally in 2006 and 2007; dominance of certain big providers is questioned. Only a few big providers, who offer end-to-end solutions, were dominating by winning large number of contracts. New, small and medium providers entered into the outsourcing business in recent years providing specialized and selective services to their clients.
Earlier, majority of clients looked towards only the big providers who provided total business solutions for the clients. The "Big Six" providers viz., IBM, Accenture, ACS, EDC, CSC, and HP were able to win mega deals (value of $1 bn and above). They are the incumbent service providers holding 72% of the $100 bn worth contracts up for renewal. Of this, EDS and IBM together hold $50 bn. However, in the recent years, the share of big six companies has declined sharply as a result of increasing competition, particularly in contracts with offshore scope. The big six firms shared 73 of the top 100 contracts in 2003, but the number went down to 53 in 2005.
In the past couple of years, the industry has been going through a dynamic phase, which led to the entry of a large number of small and medium players from different backgrounds across geographies. Of the top 100 deals signed in 2005, 34 were small and medium providers, while there were only 20 players in 2003. As the big six firms' share has been falling, small and medium companies are having a gala time. Small providers focus on limited to smaller deals, of size below $200 mn, selectively and provide more specialized services. This has led to an increase in the level and diversity of competition in the market.
Clients are not willing to rely on a single provider in the competitive world. They are looking for single outsourcing functions and are selecting "best of the breed" providers for their each individual function. They started dividing contracts into pieces and awarding them to more number of players. Balakaa Barua Agarwal, writer for Global Services magazine says, "Small and medium companies have changed the equation in the outsourcing industry because of their ability to work closely with companies, their flexibility in approach".
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