New IT and BPO outsourcing contracts dropped from 516 to 411 in the second quarter of 2012, according to research firm Everest.

The reduction in new contracts by 20 percent has been blamed on the economic crisis in Europe and uncertainty surrounding its future impact. The run-up to the US presidential elections has also seen US based companies look to distance themselves from the practice, with outsourcing linked negatively to off-shoring.

Practice director for global sourcing at Everest Group, Salil Dani, said: "The market is growing, but the pace of growth is slowing down".