Welcome!

Agile Computing Authors: Elizabeth White, Pat Romanski, Ken Schwaber, Liz McMillan, JP Morgenthal

News Feed Item

ISG Outsourcing Index: Return of the Mega Deal Gets 2014 Off to Strong Start

Ten contracts valued at more than $100 million pace growth in return to pre-recession average;

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:
https://plus.google.com/b/118326392175795521009/118326392175795521009/posts

SOURCE Information Services Group

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

@ThingsExpo Stories
Technology vendors and analysts are eager to paint a rosy picture of how wonderful IoT is and why your deployment will be great with the use of their products and services. While it is easy to showcase successful IoT solutions, identifying IoT systems that missed the mark or failed can often provide more in the way of key lessons learned. In his session at @ThingsExpo, Peter Vanderminden, Principal Industry Analyst for IoT & Digital Supply Chain to Flatiron Strategies, will focus on how IoT depl...
Data is an unusual currency; it is not restricted by the same transactional limitations as money or people. In fact, the more that you leverage your data across multiple business use cases, the more valuable it becomes to the organization. And the same can be said about the organization’s analytics. In his session at 19th Cloud Expo, Bill Schmarzo, CTO for the Big Data Practice at Dell EMC, introduced a methodology for capturing, enriching and sharing data (and analytics) across the organization...
With all the incredible momentum behind the Internet of Things (IoT) industry, it is easy to forget that not a single CEO wakes up and wonders if “my IoT is broken.” What they wonder is if they are making the right decisions to do all they can to increase revenue, decrease costs, and improve customer experience – effectively the same challenges they have always had in growing their business. The exciting thing about the IoT industry is now these decisions can be better, faster, and smarter. Now ...
WebRTC is about the data channel as much as about video and audio conferencing. However, basically all commercial WebRTC applications have been built with a focus on audio and video. The handling of “data” has been limited to text chat and file download – all other data sharing seems to end with screensharing. What is holding back a more intensive use of peer-to-peer data? In her session at @ThingsExpo, Dr Silvia Pfeiffer, WebRTC Applications Team Lead at National ICT Australia, looked at differ...
The cloud market growth today is largely in public clouds. While there is a lot of spend in IT departments in virtualization, these aren’t yet translating into a true “cloud” experience within the enterprise. What is stopping the growth of the “private cloud” market? In his general session at 18th Cloud Expo, Nara Rajagopalan, CEO of Accelerite, explored the challenges in deploying, managing, and getting adoption for a private cloud within an enterprise. What are the key differences between wh...
"ReadyTalk is an audio and web video conferencing provider. We've really come to embrace WebRTC as the platform for our future of technology," explained Dan Cunningham, CTO of ReadyTalk, in this SYS-CON.tv interview at WebRTC Summit at 19th Cloud Expo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
In 2014, Amazon announced a new form of compute called Lambda. We didn't know it at the time, but this represented a fundamental shift in what we expect from cloud computing. Now, all of the major cloud computing vendors want to take part in this disruptive technology. In his session at 20th Cloud Expo, John Jelinek IV, a web developer at Linux Academy, will discuss why major players like AWS, Microsoft Azure, IBM Bluemix, and Google Cloud Platform are all trying to sidestep VMs and containers...
IoT is at the core or many Digital Transformation initiatives with the goal of re-inventing a company's business model. We all agree that collecting relevant IoT data will result in massive amounts of data needing to be stored. However, with the rapid development of IoT devices and ongoing business model transformation, we are not able to predict the volume and growth of IoT data. And with the lack of IoT history, traditional methods of IT and infrastructure planning based on the past do not app...
The many IoT deployments around the world are busy integrating smart devices and sensors into their enterprise IT infrastructures. Yet all of this technology – and there are an amazing number of choices – is of no use without the software to gather, communicate, and analyze the new data flows. Without software, there is no IT. In this power panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, Dave McCarthy, Director of Products at Bsquare Corporation; Alan Williamson, Principal ...
WebRTC has had a real tough three or four years, and so have those working with it. Only a few short years ago, the development world were excited about WebRTC and proclaiming how awesome it was. You might have played with the technology a couple of years ago, only to find the extra infrastructure requirements were painful to implement and poorly documented. This probably left a bitter taste in your mouth, especially when things went wrong.
SYS-CON Media announced today that @WebRTCSummit Blog, the largest WebRTC resource in the world, has been launched. @WebRTCSummit Blog offers top articles, news stories, and blog posts from the world's well-known experts and guarantees better exposure for its authors than any other publication. @WebRTCSummit Blog can be bookmarked ▸ Here @WebRTCSummit conference site can be bookmarked ▸ Here
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.
Providing secure, mobile access to sensitive data sets is a critical element in realizing the full potential of cloud computing. However, large data caches remain inaccessible to edge devices for reasons of security, size, format or limited viewing capabilities. Medical imaging, computer aided design and seismic interpretation are just a few examples of industries facing this challenge. Rather than fighting for incremental gains by pulling these datasets to edge devices, we need to embrace the i...
Web Real-Time Communication APIs have quickly revolutionized what browsers are capable of. In addition to video and audio streams, we can now bi-directionally send arbitrary data over WebRTC's PeerConnection Data Channels. With the advent of Progressive Web Apps and new hardware APIs such as WebBluetooh and WebUSB, we can finally enable users to stitch together the Internet of Things directly from their browsers while communicating privately and securely in a decentralized way.
Fifty billion connected devices and still no winning protocols standards. HTTP, WebSockets, MQTT, and CoAP seem to be leading in the IoT protocol race at the moment but many more protocols are getting introduced on a regular basis. Each protocol has its pros and cons depending on the nature of the communications. Does there really need to be only one protocol to rule them all? Of course not. In his session at @ThingsExpo, Chris Matthieu, co-founder and CTO of Octoblu, walked through how Octob...
The Internet of Things can drive efficiency for airlines and airports. In their session at @ThingsExpo, Shyam Varan Nath, Principal Architect with GE, and Sudip Majumder, senior director of development at Oracle, discussed the technical details of the connected airline baggage and related social media solutions. These IoT applications will enhance travelers' journey experience and drive efficiency for the airlines and the airports.
SYS-CON Events announced today that Catchpoint, a leading digital experience intelligence company, has been named “Silver Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Catchpoint Systems is a leading Digital Performance Analytics company that provides unparalleled insight into your customer-critical services to help you consistently deliver an amazing customer experience. Designed for digital business, C...
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place June 6-8, 2017, at the Javits Center in New York City, New York, is co-located with 20th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry p...
In his General Session at 17th Cloud Expo, Bruce Swann, Senior Product Marketing Manager for Adobe Campaign, explored the key ingredients of cross-channel marketing in a digital world. Learn how the Adobe Marketing Cloud can help marketers embrace opportunities for personalized, relevant and real-time customer engagement across offline (direct mail, point of sale, call center) and digital (email, website, SMS, mobile apps, social networks, connected objects).
Things are changing so quickly in IoT that it would take a wizard to predict which ecosystem will gain the most traction. In order for IoT to reach its potential, smart devices must be able to work together. Today, there are a slew of interoperability standards being promoted by big names to make this happen: HomeKit, Brillo and Alljoyn. In his session at @ThingsExpo, Adam Justice, vice president and general manager of Grid Connect, will review what happens when smart devices don’t work togethe...