Outsourcing providers are facing increased competition from India, declining contract value and added complexity, according to a new TPI report.

The outsourcing adviser's survey indicated that the value of new contracts (excluding retendering) dropped by 8 percent in the final quarter of 2005, which represented the worst result for five years.

Although 2006 saw a record number (350) of contracts being signed, the trend towards shorter and smaller contracts and a 67 percent increase in the number of providers over the past four years has added to the challenges faced by outsourcers.

Duncan Aitchison, TPI managing director for Europe, the Middle East and Africa and Asia- Pacific regions, said: “In practice, the trend towards shorter contract duration means that outsourcing providers are obliged to compete more often in order to secure the same level of business. For many the cost of sale can become a major issue. Consequently service providers need to be increasingly selective in terms of the contracts they pursue.”