|By PR Newswire||
|April 10, 2014 11:07 AM EDT||
STAMFORD, Conn., April 10, 2014 /PRNewswire/ -- The global outsourcing industry is off to a fast start in 2014, with the return of the "mega deal" fueling double-digit growth in first-quarter contract value, according to the latest data from Information Services Group (ISG) (NASDAQ: III), a leading technology insights, market intelligence and advisory services company.
Data from the ISG Outsourcing Index, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, show 10 mega-contracts worth more than $100 million in ACV were signed in the first quarter, marking a return to a typical pre-recession (before 2008) quarterly level. These large contracts, coupled with double-digit growth in overall contracting levels, fueled a 14 percent increase in ACV over the 2013 first quarter.
Global ACV of $5.7 billion in the first quarter was generated, to a large extent, by new-scope awards, whose value grew 41 percent year-over-year, to $3.6 billion. Growth was particularly strong in new-scope information technology outsourcing (ITO), both in terms of value and in the number of contracts awarded.
"Market value this quarter is clearly being driven by the return of the mega-relationship, but the longer term trend still points to a market dominated by an increasing number of smaller contracts, with a few large deals mixed in here and there," said John Keppel, president and partner of ISG. "The first-quarter numbers, at first blush, might be a cause for industry euphoria, but a more sober view emerges when we analyze performance for the trailing 12 months. ACV in that period was down 11 percent from the prior 12-month period, yet the number of contracts awarded for the most recent 12 months – 1,183 – is at an all-time high. That seems to indicate that enterprises are continuing to opt for the greater flexibility and more specialized service that come with smaller, shorter contracts awarded to a greater number of providers. Multi-sourcing, increasing competition among providers, and lower technology costs will continue to be the factors that drive the market for the foreseeable future."
As evidence of the move to smaller contracts, the number of contracts awarded in the $5 million to $9 million range this past quarter was up 21 percent from the 2013 first quarter.
Restructured contracts continue to represent a substantial and growing portion of the market, at least in terms of deal counts, which were up 24 percent over the last 12 months. However, ACV continues to shrink as contracts are being awarded at much smaller values. ISG expects this trend to continue as multi-sourced contracts are themselves broken up, shared and delivered more efficiently in succeeding generations.
ITO was the biggest driver of first-quarter growth, with ACV up 29 percent from last year, principally the result of a number of large new-scope awards hitting the market in the first three months of 2014. Deal counts were essentially flat quarter over quarter, but were up 15 percent over the trailing 12 months. The value of contracts for IT infrastructure outsourcing in the first quarter was nearly double the average over the prior eight quarters.
Business process outsourcing (BPO) activity and values climbed significantly from the weak fourth quarter of 2013, but that spike belies an overall anemic performance for the trailing 12 months, a period that saw ACV drop by 37 percent. Multi-process and facilities management outsourcing were two areas whose first-quarter values advanced well beyond their trailing eight-quarter averages. The relative volatility in the BPO market is being caused, in part, by fast-evolving technology solutions, such as SaaS and cloud, that are transforming the market.
By region, EMEA continued its steady, reliable growth in the first quarter, with ACV up 29 percent, to $2.9 billion, and contract counts up 21 percent, driven by new scope awards and strength in ITO. It was the 11th time in the last 14 quarters the region topped the $2.5 billion mark in ACV. Growth in the UK and the Nordics was particularly notable, as was strength overall in Travel, Transport & Leisure and Business Services, both of which easily eclipsed their average values over the previous eight quarters. France stood out as well, boosted by several large transactions for network and application development and maintenance outsourcing.
In the Americas, the market rebounded from a dismal fourth quarter to post its highest ACV, $1.9 billion, in the last four quarters, although year-over-year and trailing 12-month comparisons are not as rosy. ACV dropped 24 percent over the last year, while the number of contracts declined modestly. For the quarter, the ACV of restructured and BPO contacts both rose sharply, while new scope was largely flat and ITO deals fell 8 percent. By industry, financial services saw a significant increase in ACV, supported by a number of BPO transactions, while Retail and Business Services grew quarter-over-quarter and year-on-year.
Asia Pacific, meanwhile, had its best quarter in nearly two years, with a number of mega-relationships driving extraordinary gains in both restructuring and new-scope ACV. The annual value of ITO contracts spiked 80 percent, helped by large deals and overall robust contracting activity. Australia/New Zealand, India and Southeast Asia all recorded triple-digit gains in ACV, while Manufacturing , Telecommunications & Media, and Travel & Transport were the industry sectors that saw the largest ACV gains.
In addition to its traditional look at commercial outsourcing, ISG this quarter also reported on the performance of the global public sector outsourcing market. According to ISG research, the public sector represents 64 percent of the global outsourcing market, outpacing the commercial sector both in terms of global share and average contract size. ACV for the trailing 12 months totaled $35 billion, up 30 percent over the previous 12-month period, with the ACV of ITO about four times as large as that of BPO. Growth is expected to continue as government entities, in the face of leaner tax rolls and greater demand for services, increasingly leverage technology to deliver those services more efficiently. In particular, an upheaval in the U.S. healthcare market, including a heightened attention to cost control, is creating unprecedented opportunities for sourcing activity in both the commercial and public sectors.
"The year is off to strong start, thanks in large measure to the reappearance of the mega-relationship and a surge in new-scope ITO awards," said Keppel. "That bodes well for both the first half and the full year. We now expect at least 15 percent ACV growth in the first half, and high single-digit growth for the full year. There is quite a bit of activity now in the industry pipeline, and we believe the number of contracts likely will continue to grow at a faster pace than ACV, particularly as many second-generation contracts are renewed and restructured in multi-sourced environments."
Now in its 46th consecutive quarter, the ISG Outsourcing Index provides a quarterly review of the latest sourcing industry data and trends for clients, service providers, analysts and the media. For more than a decade, it has been the authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider performance.
The 1Q 2014 ISG Outsourcing Index was presented during a conference call and webcast for media and analysts today. To listen to an audio replay of the call and view presentation slides, please visit http://www.isg-one.com/web/research-insights/isg-outsourcing-index/.
About Information Services Group
Information Services Group (ISG) (NASDAQ: III) is a leading technology insights, market intelligence and advisory services company, serving more than 500 clients around the world to help them achieve operational excellence. ISG supports private and public sector organizations to transform and optimize their operational environments through research, benchmarking, consulting and managed services, with a focus on information technology, business process transformation, program management services and enterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, the deepest data source in the industry, and more than five decades of experience and global leadership in information and advisory services. Based in Stamford, Conn., the company has more than 850 employees and operates in 21 countries.
For additional information, visit www.isg-one.com.
Follow us on Twitter: https://twitter.com/ISG_News
Follow us on LinkedIn: http://www.linkedin.com/company/information-services-group
Follow us on Google Plus:
SOURCE Information Services Group
The 19th International Cloud Expo has announced that its Call for Papers is open. Cloud Expo, to be held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, brings together Cloud Computing, Big Data, Internet of Things, DevOps, Digital Transformation, Microservices and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding business opportuni...
Jul. 23, 2016 10:15 PM EDT Reads: 2,400
From wearable activity trackers to fantasy e-sports, data and technology are transforming the way athletes train for the game and fans engage with their teams. In his session at @ThingsExpo, will present key data findings from leading sports organizations San Francisco 49ers, Orlando Magic NBA team. By utilizing data analytics these sports orgs have recognized new revenue streams, doubled its fan base and streamlined costs at its stadiums. John Paul is the CEO and Founder of VenueNext. Prior ...
Jul. 23, 2016 09:30 PM EDT Reads: 1,936
A critical component of any IoT project is what to do with all the data being generated. This data needs to be captured, processed, structured, and stored in a way to facilitate different kinds of queries. Traditional data warehouse and analytical systems are mature technologies that can be used to handle certain kinds of queries, but they are not always well suited to many problems, particularly when there is a need for real-time insights.
Jul. 23, 2016 08:45 PM EDT Reads: 1,637
CenturyLink has announced that application server solutions from GENBAND are now available as part of CenturyLink’s Networx contracts. The General Services Administration (GSA)’s Networx program includes the largest telecommunications contract vehicles ever awarded by the federal government. CenturyLink recently secured an extension through spring 2020 of its offerings available to federal government agencies via GSA’s Networx Universal and Enterprise contracts. GENBAND’s EXPERiUS™ Application...
Jul. 23, 2016 08:30 PM EDT Reads: 1,764
"My role is working with customers, helping them go through this digital transformation. I spend a lot of time talking to banks, big industries, manufacturers working through how they are integrating and transforming their IT platforms and moving them forward," explained William Morrish, General Manager Product Sales at Interoute, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Jul. 23, 2016 08:30 PM EDT Reads: 2,010
Internet of @ThingsExpo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with the 19th International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world and ThingsExpo Silicon Valley Call for Papers is now open.
Jul. 23, 2016 08:00 PM EDT Reads: 2,408
Big Data engines are powering a lot of service businesses right now. Data is collected from users from wearable technologies, web behaviors, purchase behavior as well as several arbitrary data points we’d never think of. The demand for faster and bigger engines to crunch and serve up the data to services is growing exponentially. You see a LOT of correlation between “Cloud” and “Big Data” but on Big Data and “Hybrid,” where hybrid hosting is the sanest approach to the Big Data Infrastructure pro...
Jul. 23, 2016 08:00 PM EDT Reads: 1,777
The IoT is changing the way enterprises conduct business. In his session at @ThingsExpo, Eric Hoffman, Vice President at EastBanc Technologies, discussed how businesses can gain an edge over competitors by empowering consumers to take control through IoT. He cited examples such as a Washington, D.C.-based sports club that leveraged IoT and the cloud to develop a comprehensive booking system. He also highlighted how IoT can revitalize and restore outdated business models, making them profitable ...
Jul. 23, 2016 07:15 PM EDT Reads: 1,863
We all know the latest numbers: Gartner, Inc. forecasts that 6.4 billion connected things will be in use worldwide in 2016, up 30 percent from last year, and will reach 20.8 billion by 2020. We're rapidly approaching a data production of 40 zettabytes a day – more than we can every physically store, and exabytes and yottabytes are just around the corner. For many that’s a good sign, as data has been proven to equal money – IF it’s ingested, integrated, and analyzed fast enough. Without real-ti...
Jul. 23, 2016 07:00 PM EDT Reads: 858
I wanted to gather all of my Internet of Things (IOT) blogs into a single blog (that I could later use with my University of San Francisco (USF) Big Data “MBA” course). However as I started to pull these blogs together, I realized that my IOT discussion lacked a vision; it lacked an end point towards which an organization could drive their IOT envisioning, proof of value, app dev, data engineering and data science efforts. And I think that the IOT end point is really quite simple…
Jul. 23, 2016 06:15 PM EDT Reads: 785
With 15% of enterprises adopting a hybrid IT strategy, you need to set a plan to integrate hybrid cloud throughout your infrastructure. In his session at 18th Cloud Expo, Steven Dreher, Director of Solutions Architecture at Green House Data, discussed how to plan for shifting resource requirements, overcome challenges, and implement hybrid IT alongside your existing data center assets. Highlights included anticipating workload, cost and resource calculations, integrating services on both sides...
Jul. 23, 2016 06:00 PM EDT Reads: 1,878
"We are a well-established player in the application life cycle management market and we also have a very strong version control product," stated Flint Brenton, CEO of CollabNet,, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Jul. 23, 2016 05:30 PM EDT Reads: 1,713
The IoT has the potential to create a renaissance of manufacturing in the US and elsewhere. In his session at 18th Cloud Expo, Florent Solt, CTO and chief architect of Netvibes, discussed how the expected exponential increase in the amount of data that will be processed, transported, stored, and accessed means there will be a huge demand for smart technologies to deliver it. Florent Solt is the CTO and chief architect of Netvibes. Prior to joining Netvibes in 2007, he co-founded Rift Technologi...
Jul. 23, 2016 05:00 PM EDT Reads: 934
Unless your company can spend a lot of money on new technology, re-engineering your environment and hiring a comprehensive cybersecurity team, you will most likely move to the cloud or seek external service partnerships. In his session at 18th Cloud Expo, Darren Guccione, CEO of Keeper Security, revealed what you need to know when it comes to encryption in the cloud.
Jul. 23, 2016 04:00 PM EDT Reads: 2,301
We're entering the post-smartphone era, where wearable gadgets from watches and fitness bands to glasses and health aids will power the next technological revolution. With mass adoption of wearable devices comes a new data ecosystem that must be protected. Wearables open new pathways that facilitate the tracking, sharing and storing of consumers’ personal health, location and daily activity data. Consumers have some idea of the data these devices capture, but most don’t realize how revealing and...
Jul. 23, 2016 04:00 PM EDT Reads: 1,974
What are the successful IoT innovations from emerging markets? What are the unique challenges and opportunities from these markets? How did the constraints in connectivity among others lead to groundbreaking insights? In her session at @ThingsExpo, Carmen Feliciano, a Principal at AMDG, will answer all these questions and share how you can apply IoT best practices and frameworks from the emerging markets to your own business.
Jul. 23, 2016 03:45 PM EDT Reads: 1,505
Basho Technologies has announced the latest release of Basho Riak TS, version 1.3. Riak TS is an enterprise-grade NoSQL database optimized for Internet of Things (IoT). The open source version enables developers to download the software for free and use it in production as well as make contributions to the code and develop applications around Riak TS. Enhancements to Riak TS make it quick, easy and cost-effective to spin up an instance to test new ideas and build IoT applications. In addition to...
Jul. 23, 2016 03:30 PM EDT Reads: 1,838
You think you know what’s in your data. But do you? Most organizations are now aware of the business intelligence represented by their data. Data science stands to take this to a level you never thought of – literally. The techniques of data science, when used with the capabilities of Big Data technologies, can make connections you had not yet imagined, helping you discover new insights and ask new questions of your data. In his session at @ThingsExpo, Sarbjit Sarkaria, data science team lead ...
Jul. 23, 2016 03:15 PM EDT Reads: 816
Extracting business value from Internet of Things (IoT) data doesn’t happen overnight. There are several requirements that must be satisfied, including IoT device enablement, data analysis, real-time detection of complex events and automated orchestration of actions. Unfortunately, too many companies fall short in achieving their business goals by implementing incomplete solutions or not focusing on tangible use cases. In his general session at @ThingsExpo, Dave McCarthy, Director of Products...
Jul. 23, 2016 03:00 PM EDT Reads: 1,652
Ask someone to architect an Internet of Things (IoT) solution and you are guaranteed to see a reference to the cloud. This would lead you to believe that IoT requires the cloud to exist. However, there are many IoT use cases where the cloud is not feasible or desirable. In his session at @ThingsExpo, Dave McCarthy, Director of Products at Bsquare Corporation, will discuss the strategies that exist to extend intelligence directly to IoT devices and sensors, freeing them from the constraints of ...
Jul. 23, 2016 02:30 PM EDT Reads: 1,702