|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
Today air travel is a minefield of delays, hassles and customer disappointment. Airlines struggle to revitalize the experience. GE and M2Mi will demonstrate practical examples of how IoT solutions are helping airlines bring back personalization, reduce trip time and improve reliability. In their session at @ThingsExpo, Shyam Varan Nath, Principal Architect with GE, and Dr. Sarah Cooper, M2Mi’s VP Business Development and Engineering, explored the IoT cloud-based platform technologies driving this change including privacy controls, data transparency and integration of real time context with p...
Nov. 30, 2015 02:00 AM EST Reads: 446
I recently attended and was a speaker at the 4th International Internet of @ThingsExpo at the Santa Clara Convention Center. I also had the opportunity to attend this event last year and I wrote a blog from that show talking about how the “Enterprise Impact of IoT” was a key theme of last year’s show. I was curious to see if the same theme would still resonate 365 days later and what, if any, changes I would see in the content presented.
Nov. 30, 2015 02:00 AM EST Reads: 447
Cloud computing delivers on-demand resources that provide businesses with flexibility and cost-savings. The challenge in moving workloads to the cloud has been the cost and complexity of ensuring the initial and ongoing security and regulatory (PCI, HIPAA, FFIEC) compliance across private and public clouds. Manual security compliance is slow, prone to human error, and represents over 50% of the cost of managing cloud applications. Determining how to automate cloud security compliance is critical to maintaining positive ROI. Raxak Protect is an automated security compliance SaaS platform and ma...
Nov. 30, 2015 12:00 AM EST Reads: 449
The Internet of Things (IoT) is growing rapidly by extending current technologies, products and networks. By 2020, Cisco estimates there will be 50 billion connected devices. Gartner has forecast revenues of over $300 billion, just to IoT suppliers. Now is the time to figure out how you’ll make money – not just create innovative products. With hundreds of new products and companies jumping into the IoT fray every month, there’s no shortage of innovation. Despite this, McKinsey/VisionMobile data shows "less than 10 percent of IoT developers are making enough to support a reasonably sized team....
Nov. 29, 2015 02:00 PM EST Reads: 487
Just over a week ago I received a long and loud sustained applause for a presentation I delivered at this year’s Cloud Expo in Santa Clara. I was extremely pleased with the turnout and had some very good conversations with many of the attendees. Over the next few days I had many more meaningful conversations and was not only happy with the results but also learned a few new things. Here is everything I learned in those three days distilled into three short points.
Nov. 29, 2015 01:00 PM EST Reads: 358
DevOps is about increasing efficiency, but nothing is more inefficient than building the same application twice. However, this is a routine occurrence with enterprise applications that need both a rich desktop web interface and strong mobile support. With recent technological advances from Isomorphic Software and others, rich desktop and tuned mobile experiences can now be created with a single codebase – without compromising functionality, performance or usability. In his session at DevOps Summit, Charles Kendrick, CTO and Chief Architect at Isomorphic Software, demonstrated examples of com...
Nov. 29, 2015 12:45 PM EST Reads: 422
As organizations realize the scope of the Internet of Things, gaining key insights from Big Data, through the use of advanced analytics, becomes crucial. However, IoT also creates the need for petabyte scale storage of data from millions of devices. A new type of Storage is required which seamlessly integrates robust data analytics with massive scale. These storage systems will act as “smart systems” provide in-place analytics that speed discovery and enable businesses to quickly derive meaningful and actionable insights. In his session at @ThingsExpo, Paul Turner, Chief Marketing Officer at...
Nov. 29, 2015 12:30 PM EST Reads: 427
In his keynote at @ThingsExpo, Chris Matthieu, Director of IoT Engineering at Citrix and co-founder and CTO of Octoblu, focused on building an IoT platform and company. He provided a behind-the-scenes look at Octoblu’s platform, business, and pivots along the way (including the Citrix acquisition of Octoblu).
Nov. 29, 2015 12:00 PM EST Reads: 529
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).
Nov. 29, 2015 11:45 AM EST Reads: 333
The Internet of Everything is re-shaping technology trends–moving away from “request/response” architecture to an “always-on” Streaming Web where data is in constant motion and secure, reliable communication is an absolute necessity. As more and more THINGS go online, the challenges that developers will need to address will only increase exponentially. In his session at @ThingsExpo, Todd Greene, Founder & CEO of PubNub, exploreed the current state of IoT connectivity and review key trends and technology requirements that will drive the Internet of Things from hype to reality.
Nov. 29, 2015 09:45 AM EST Reads: 454
Two weeks ago (November 3-5), I attended the Cloud Expo Silicon Valley as a speaker, where I presented on the security and privacy due diligence requirements for cloud solutions. Cloud security is a topical issue for every CIO, CISO, and technology buyer. Decision-makers are always looking for insights on how to mitigate the security risks of implementing and using cloud solutions. Based on the presentation topics covered at the conference, as well as the general discussions heard between sessions, I wanted to share some of my observations on emerging trends. As cyber security serves as a fou...
Nov. 29, 2015 09:15 AM EST Reads: 347
We all know that data growth is exploding and storage budgets are shrinking. Instead of showing you charts on about how much data there is, in his General Session at 17th Cloud Expo, Scott Cleland, Senior Director of Product Marketing at HGST, showed how to capture all of your data in one place. After you have your data under control, you can then analyze it in one place, saving time and resources.
Nov. 29, 2015 08:45 AM EST Reads: 232
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 all corporate assets – people, objects, and spaces – can share information about themselves and thei...
Nov. 29, 2015 08:00 AM EST Reads: 282
The cloud. Like a comic book superhero, there seems to be no problem it can’t fix or cost it can’t slash. Yet making the transition is not always easy and production environments are still largely on premise. Taking some practical and sensible steps to reduce risk can also help provide a basis for a successful cloud transition. A plethora of surveys from the likes of IDG and Gartner show that more than 70 percent of enterprises have deployed at least one or more cloud application or workload. Yet a closer inspection at the data reveals less than half of these cloud projects involve production...
Nov. 29, 2015 07:00 AM EST Reads: 501
Continuous processes around the development and deployment of applications are both impacted by -- and a benefit to -- the Internet of Things trend. To help better understand the relationship between DevOps and a plethora of new end-devices and data please welcome Gary Gruver, consultant, author and a former IT executive who has led many large-scale IT transformation projects, and John Jeremiah, Technology Evangelist at Hewlett Packard Enterprise (HPE), on Twitter at @j_jeremiah. The discussion is moderated by me, Dana Gardner, Principal Analyst at Interarbor Solutions.
Nov. 29, 2015 06:45 AM EST Reads: 745
Discussions of cloud computing have evolved in recent years from a focus on specific types of cloud, to a world of hybrid cloud, and to a world dominated by the APIs that make today's multi-cloud environments and hybrid clouds possible. In this Power Panel at 17th Cloud Expo, moderated by Conference Chair Roger Strukhoff, panelists addressed the importance of customers being able to use the specific technologies they need, through environments and ecosystems that expose their APIs to make true change and transformation possible.
Nov. 29, 2015 06:00 AM EST Reads: 561
Too often with compelling new technologies market participants become overly enamored with that attractiveness of the technology and neglect underlying business drivers. This tendency, what some call the “newest shiny object syndrome” is understandable given that virtually all of us are heavily engaged in technology. But it is also mistaken. Without concrete business cases driving its deployment, IoT, like many other technologies before it, will fade into obscurity.
Nov. 29, 2015 06:00 AM EST Reads: 377
Microservices are a very exciting architectural approach that many organizations are looking to as a way to accelerate innovation. Microservices promise to allow teams to move away from monolithic "ball of mud" systems, but the reality is that, in the vast majority of organizations, different projects and technologies will continue to be developed at different speeds. How to handle the dependencies between these disparate systems with different iteration cycles? Consider the "canoncial problem" in this scenario: microservice A (releases daily) depends on a couple of additions to backend B (re...
Nov. 29, 2015 05:00 AM EST Reads: 465
The Internet of Things is clearly many things: data collection and analytics, wearables, Smart Grids and Smart Cities, the Industrial Internet, and more. Cool platforms like Arduino, Raspberry Pi, Intel's Galileo and Edison, and a diverse world of sensors are making the IoT a great toy box for developers in all these areas. In this Power Panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists discussed what things are the most important, which will have the most profound effect on the world, and what should we expect to see over the next couple of years.
Nov. 29, 2015 04:30 AM EST Reads: 489
Container technology is shaping the future of DevOps and it’s also changing the way organizations think about application development. With the rise of mobile applications in the enterprise, businesses are abandoning year-long development cycles and embracing technologies that enable rapid development and continuous deployment of apps. In his session at DevOps Summit, Kurt Collins, Developer Evangelist at Built.io, examined how Docker has evolved into a highly effective tool for application delivery by allowing increasingly popular Mobile Backend-as-a-Service (mBaaS) platforms to quickly crea...
Nov. 29, 2015 04:00 AM EST Reads: 381