The number of information technology outsourcing transactions was flat in 2012 and total contract value declined 25 percent in the banking, financial services and insurance industry. However, the share of those deals in the insurance space increased 35 percent compared to the prior year, according to a report from Everest Global Inc.
Within the banking, financial services and insurance (BFSI) industry, the insurance industry accounted for more than 80 percent of total ITO deals and contract renewals increased by 25 percent, according to Everest’s
The insurance ITO market, worth $30 billion to $35 billion in 2012, grew based on insurers’ need for complex work, such as analytics and actuarial analysis, technologies to improve the customer experience and platform-based solutions, Everest said, and also drove a 15-percent increases in business process outsourcing (BPO).
The total number of ITO deals in BFSI has been declining since its recent peak in 2009, Everest said. In 2012, there were 192 ITO transactions, (including 17 percent renewals/restructuring and 83 percent new transaction signings) compared to 190 in 2011 (including 14 percent renewals/restructuring); 202 in 2010 (including 15 percent renewals/restructuring); 230 in 2009 (including 16 percent renewals/restructuring); and 189 in 2008 (including 12 percent renewals/restructuring).
In the United States, there were 34 deals in 2012; 43 in 2011; 55 in 2010; 64 in 2009; and 42 in 2008.
Total contract value of BFSI ITO also has declined from a peak of $9.7 billion in 2009, to $7.6 billion in 2010; $7.7 billion in 2011, to $5.8 billion in 2012, Everest said. And in the first quarter of 2012, there was an uptick in both the number and value of deals within the insurance industry compared to 2011.
From 2008 to 2012, the average-total-contract value in the insurance industry was $124 million, compared to $105 million in the banking industry and $89 million in the capital markets.
In 2012, there were 23 BFSI ITO contracts announced, ranging in duration from two to four years. The average contract duration of the deals has fluctuated between 4.6 years in 2008, peaking in 2011 at 5.2 years and was 5 years in 2012, Everest said.
The average deal duration for that period was 5.4 years, compared to 4.7 for banking and 4.8 for capital markets; and the average annualized-contract value (ACV) for insurers was $19 million, compared to $21 million for banking and $17 million for capital markets.
