Gartner Says Many Organizations Are Creating "Megascope" Outsourcing Deals Instead of Megadeals in 2007

Keys to Successful Outsourcing Deals to be Discussed at Upcoming Gartner Outsourcing Summit, March 19-21 in Dallas

STAMFORD, Conn., January 25, 2007 — Megadeals, contracts with more than $1 billion of contract value, have long been used to gauge the acceptance of outsourcing by organizations and appraise the top line growth of the providers that win these deals. As more organizations adopt a selective outsourcing model, Gartner, Inc. says that “megascope” deals are the new yardstick of big outsourcing contract signings.

A megascope indicates an enterprise-wide scope of work that is or will be outsourced; the organization awards the work to several providers on a selective basis, matching scope and requirements to the best value or best-fit provider. Cumulatively, the megascope award tops $1 billion in value, but each individual contract typically will not exceed $1 billion in value. In some situations (more the exception than the norm), a megascope award could also include a megadeal.

According to Gartner, organizations generally will not award large IT outsourcing contracts to one provider in 2007, but rather will split the work up among several providers. “We expect large organizations to source the largest parts of their megascope engagements to large providers that have a similar global presence,” said Lorrie Scardino, research vice president at Gartner. “However, these large organizations will consider and select smaller or regional providers for focused parts of their megascope deals to engage with focused specialists, expand the scope of services that are globally delivered or introduce a new provider into the mix.”

In 2006, many organizations made several awards by breaking up the scope of work into selective segments. Although not all of these selective awards were megascope candidates, the total contract value awarded by a single client to multiple providers is a significant indication of the specific organization’s adoption or continuation of outsourcing as a pillar of business strategy, as well as the market’s continued growth.

”Megadeals are still popular for large organizations, and megascope awards are gaining in popularity. However, such large deals are still only suitable for organizations that have mature sourcing processes and the experience to manage multiple providers,” said Kurt Potter, research director at Gartner. “Fewer than one-third of organizations have a formal sourcing strategy, and many of them are using multiple providers and advanced sourcing practices.”

Additional information on what happened in outsourcing in 2006 and what Gartner expects in 2007 is available in the Gartner report “Gartner on Outsourcing, 2006.” The report is available on Gartner’s Web site at www.gartner.com/DisplayDocument?ref=g_search&id=499615&subref=simplesearch.

Gartner analysts created a new management discipline called “multisourcing” which is designed to obtain the optimal mix of internal and external sources and manage them to consistently achieve business objectives and sustain competitive advantage. Gartner analysts will further discuss multisourcing and outsourcing trends at the Gartner Outsourcing Summit, taking place March 19-21 in Dallas. The Gartner Outsourcing Summit is the only event that provides a comprehensive view of the entire outsourcing market — infrastructure, application and business process outsourcing, global delivery and the use of offshore providers, as well as issues and trends about new delivery models, such as software as a service. The Summit provides unbiased, road-tested advice and best practices necessary for setting outsourcing strategies and objectives, evaluating and selecting the right service providers and managing relationships with them. Many of the 50-plus content sessions will feature case studies and panel discussions presented by end users and industry professionals. For complete event details please visit the Gartner Outsourcing Summit Web site www.gartner.com/us/outsourcing.

Members of the media can register by contacting Christy Pettey at christy.pettey@gartner.com.

 

Contact:


Christy Pettey
Gartner
+1 408 468 8312
christy.pettey@gartner.com


About Gartner:
Gartner, Inc. (NYSE: IT) is the world's leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, Gartner is the indispensable partner to 60,000 clients in 10,000 distinct organizations. Through the resources of Gartner Research, Gartner Consulting and Gartner Events, Gartner works with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,000 associates, including 1,200 research analysts and consultants in 80 countries. For more information, visit www.gartner.com.