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It has been reported by Salil Dani the practice director for global sourcing at Everest Group that the number of new IT and business process outsourcing contracts worldwide has dropped by 20% to 411 in the second quarter from 516 in the same quarter a year ago. Additionally, the number of contracts in the third quarter was down to 381 from 472 in the same quarter last year.

The average contract value has also been reduced, particularly in business process outsourcing which was down to US$1.5 billion in the third quarter from $2.7 billion in the same quarter last year reports Dani.

The reduced figures for the third quarter is concerning as this is usually the busiest period in the outsourcing industry. The decline of outsourcing contracts can be partly attributed to the economic problems faced in Europe where the discretionary spending on IT has slowed down considerably and also the US where US customers are opting to outsource to smaller cities within the country. These outsourcing contracts are small in numbers due to the cost and staffing disadvantages faced by the chosen US cities compared to other parts of the world.

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