The IT services market has suffered a massive blow in the second quarter of 2011, with new contract signings falling to its lowest value in more than eight years according to research firm Ovum.
The new report reveals Total Contract Value (TCV) fell by 40 per cent year-on-year to $19 billion. The result is the lowest reported in over 8 years since Q1 of 2003, with Asia-Pacific countries experiencing a less dramatic drop of 4 per cent.
Ovum’s research also identified a decrease in deals recorded worldwide for the fourth consecutive quarter to just 384. This was the lowest recorded number of deals since Q4 2007.
Ed Thomas, Ovum analyst and author of the report, said “After a disappointing start to the year, things went from bad to worse in the second quarter of 2011 with this very weak performance in contract signings”.
“In previous quarters, the buoyancy of the public sector outsourcing market has gone some way toward offsetting the lacklustre returns from enterprise clients. However, on this occasion government spending on IT services projects also took a hit, with a notable lack of large-scale projects on offer.”
In the second quarter of 2011, no mega deals (valued in excess of $1 billion) were signed, with public sector bodies also failing to close major deals.
Of the large deals made, HP was chosen by the Australian Taxation Office to manage its IT infrastructure, including mainframes, server management, storage management and data centre services, valued at $500 million.