2Q Spending on IT Outsourcing Booms, Y2K Skeptics In Disarray

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VIENNA, Va.--(BUSINESS WIRE)--Aug. 9, 1999--At more than $51.4 billion, IT outsourcing contract activity in 2Q 1999 rose more than three times above the 1Q level of $15.2 billion, and more than four times the 2Q 1998 total of $12.3 billion, according to a study released by INPUT (http://www.input.com) today.

In the study entitled ``IT Services Contract Activity Summary - Second Quarter 1999,'' INPUT identified 183 significant contracts whose total value reverses 1Q's dip, based primarily on 55 contracts awarded in the federal sector with an estimated value of $27.3 billion.

However, even when IDIQ federal contracts with indefinite values are excluded (GSA's Millenia project), total commercial sector contract activity of $24 billion rose 162% over 1Q and 232% over 4Q 1998's total value of $7.3 billion.

More importantly, these figures include as well the cancellation of the EDS award from the State of Connecticut, which had been valued at over $1 billion. Tech Data was the top vendor in 2Q with a 12% market share based on a huge contract win from GE Capital IT Solutions

The new report is part of a series of quarterly reports that track the comparative performance of leading IT outsourcing vendors, and monitor their relative success in winning new business, adjusting to changes in market demand, and moving their business mix towards higher, value-added markets and contracts.

Excluding the large federal Millenia project, Tech Data took a 34% share of 2Q total contract values, Nortel, 28%, followed by EDS with 25% and CSC with 13%. Tech Data took the top rank in the business process management segment, and IBM Global in the electronic markets and insurance segments. Nortel took the top spot in network management, EDS in manufacturing, Getronics Wang in banking, UNISYS in the state and local government segment and the Sabre Group in transportation. Geographically, North America dominated 2Q contracts (97%) compared with Europe's 3%, down from 11% in 1Q 1999.

According to Albert Nekimken, Senior Analyst at INPUT, ``The resurgence of strong contract activity in 2Q counters the skeptics who had forecast a severe downturn in spending on new outsourcing projects due to Y2K issues. While there has been rotation among industry segments and contract types, overall spending remains robust. Also, EDS, CSC, IBM Global and other top vendors report huge pipelines of business yet to be finalized.'' Even if San Diego County were to back down from awarding an expected $1 billion outsourcing contract in September, the trend toward increased spending shows every sign of continuing. The State of Connecticut intends to spend large amounts, albeit in smaller contracts to a wider range of IT vendors.

With offices in Mountain View, CA and Washington, D.C. as well as affiliates in Europe and Asia, INPUT has been serving clients globally since 1974 and is an industry leader in providing intelligence and consulting services to the IT software & services sector. For more information about this report and/or INPUT's Operational Services program, contact Raj Barua at 1881 Landings Dirve; Mountain View, CA 94043; tel: 650/961-3300; fax: 650/961-3966; e-mail: rbarua@input.com.

NOTE TO EDITORS: Further details of research findings are available on request. For more information please contact Raj Barua at rbarua@input.com or call 650/528-6341.

-- Bill S (bis@outta.here), August 10, 1999

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