IT Pricing Coming Down, Outsourcing Going Up

Analysts who follow the major IT outsourcing firms like Accenture, IBM, Infosys and CSC say banks are getting more bang for their bucks, as a major price squeeze favors foreign firms over their American counterparts when it comes to winning deals. “On the pricing front, we are increasingly concerned that the larger IT services firms are likely to bid more aggressively on deals in 2H10 and 2011 in order to grow bookings and revenues and we wonder if we’re in or soon entering a period of price deflation,” writes Karl Keirsted of Kaufman Bros. in a recent report on Accenture.  “In our judgment, these industry trends favor the cheaper India-based firms over the larger firms such as IBM and Accenture..” At the same time, Keirsted finds that spending on applications outsouring and consolidation “is on fire.”

This jibes with research from The Everest Research Institute, which noted that traditional global suppliers saw their operating margins decline significantly in the first quarter of 2010, whereas offshore-centric suppliers saw only a slight dip in operating margins in the first quarter. In the second quarter, the banking and financial services sector increased outsourcing activity by 41 percent compared with the first quarter. Included in that pool is a $153 million deal signed by RBS with Willams Lea.


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