Welcome!

Agile Computing Authors: Pat Romanski, Yeshim Deniz, Liz McMillan, Paul Simmons, Elizabeth White

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
"Akvelon is a software development company and we also provide consultancy services to folks who are looking to scale or accelerate their engineering roadmaps," explained Jeremiah Mothersell, Marketing Manager at Akvelon, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
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...
DXWorldEXPO LLC announced today that the upcoming DXWorldEXPO | CloudEXPO New York event will feature 10 companies from Poland to participate at the "Poland Digital Transformation Pavilion" on November 12-13, 2018.
22nd International Cloud Expo, taking place June 5-7, 2018, at the Javits Center in New York City, NY, and co-located with the 1st DXWorld Expo will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud ...
@DevOpsSummit at Cloud Expo, taking place November 12-13 in New York City, NY, is co-located with 22nd international CloudEXPO | first international DXWorldEXPO and will feature technical sessions from a rock star conference faculty and the leading industry players in the world.
More and more brands have jumped on the IoT bandwagon. We have an excess of wearables – activity trackers, smartwatches, smart glasses and sneakers, and more that track seemingly endless datapoints. However, most consumers have no idea what “IoT” means. Creating more wearables that track data shouldn't be the aim of brands; delivering meaningful, tangible relevance to their users should be. We're in a period in which the IoT pendulum is still swinging. Initially, it swung toward "smart for smart...
As data explodes in quantity, importance and from new sources, the need for managing and protecting data residing across physical, virtual, and cloud environments grow with it. Managing data includes protecting it, indexing and classifying it for true, long-term management, compliance and E-Discovery. Commvault can ensure this with a single pane of glass solution – whether in a private cloud, a Service Provider delivered public cloud or a hybrid cloud environment – across the heterogeneous enter...
DXWorldEXPO LLC announced today that ICC-USA, a computer systems integrator and server manufacturing company focused on developing products and product appliances, will exhibit at the 22nd International CloudEXPO | DXWorldEXPO. DXWordEXPO New York 2018, colocated with CloudEXPO New York 2018 will be held November 11-13, 2018, in New York City. ICC is a computer systems integrator and server manufacturing company focused on developing products and product appliances to meet a wide range of ...
Michael Maximilien, better known as max or Dr. Max, is a computer scientist with IBM. At IBM Research Triangle Park, he was a principal engineer for the worldwide industry point-of-sale standard: JavaPOS. At IBM Research, some highlights include pioneering research on semantic Web services, mashups, and cloud computing, and platform-as-a-service. He joined the IBM Cloud Labs in 2014 and works closely with Pivotal Inc., to help make the Cloud Found the best PaaS.
Headquartered in Plainsboro, NJ, Synametrics Technologies has provided IT professionals and computer systems developers since 1997. Based on the success of their initial product offerings (WinSQL and DeltaCopy), the company continues to create and hone innovative products that help its customers get more from their computer applications, databases and infrastructure. To date, over one million users around the world have chosen Synametrics solutions to help power their accelerated business or per...
In an era of historic innovation fueled by unprecedented access to data and technology, the low cost and risk of entering new markets has leveled the playing field for business. Today, any ambitious innovator can easily introduce a new application or product that can reinvent business models and transform the client experience. In their Day 2 Keynote at 19th Cloud Expo, Mercer Rowe, IBM Vice President of Strategic Alliances, and Raejeanne Skillern, Intel Vice President of Data Center Group and ...
Dion Hinchcliffe is an internationally recognized digital expert, bestselling book author, frequent keynote speaker, analyst, futurist, and transformation expert based in Washington, DC. He is currently Chief Strategy Officer at the industry-leading digital strategy and online community solutions firm, 7Summits.
Founded in 2000, Chetu Inc. is a global provider of customized software development solutions and IT staff augmentation services for software technology providers. By providing clients with unparalleled niche technology expertise and industry experience, Chetu has become the premiere long-term, back-end software development partner for start-ups, SMBs, and Fortune 500 companies. Chetu is headquartered in Plantation, Florida, with thirteen offices throughout the U.S. and abroad.
In his Opening Keynote at 21st Cloud Expo, John Considine, General Manager of IBM Cloud Infrastructure, led attendees through the exciting evolution of the cloud. He looked at this major disruption from the perspective of technology, business models, and what this means for enterprises of all sizes. John Considine is General Manager of Cloud Infrastructure Services at IBM. In that role he is responsible for leading IBM’s public cloud infrastructure including strategy, development, and offering m...
From 2013, NTT Communications has been providing cPaaS service, SkyWay. Its customer’s expectations for leveraging WebRTC technology are not only typical real-time communication use cases such as Web conference, remote education, but also IoT use cases such as remote camera monitoring, smart-glass, and robotic. Because of this, NTT Communications has numerous IoT business use-cases that its customers are developing on top of PaaS. WebRTC will lead IoT businesses to be more innovative and address...
Rodrigo Coutinho is part of OutSystems' founders' team and currently the Head of Product Design. He provides a cross-functional role where he supports Product Management in defining the positioning and direction of the Agile Platform, while at the same time promoting model-based development and new techniques to deliver applications in the cloud.
Business professionals no longer wonder if they'll migrate to the cloud; it's now a matter of when. The cloud environment has proved to be a major force in transitioning to an agile business model that enables quick decisions and fast implementation that solidify customer relationships. And when the cloud is combined with the power of cognitive computing, it drives innovation and transformation that achieves astounding competitive advantage.
IoT is rapidly becoming mainstream as more and more investments are made into the platforms and technology. As this movement continues to expand and gain momentum it creates a massive wall of noise that can be difficult to sift through. Unfortunately, this inevitably makes IoT less approachable for people to get started with and can hamper efforts to integrate this key technology into your own portfolio. There are so many connected products already in place today with many hundreds more on the h...
In his session at Cloud Expo, Alan Winters, U.S. Head of Business Development at MobiDev, presented a success story of an entrepreneur who has both suffered through and benefited from offshore development across multiple businesses: The smart choice, or how to select the right offshore development partner Warning signs, or how to minimize chances of making the wrong choice Collaboration, or how to establish the most effective work processes Budget control, or how to maximize project result...
Personalization has long been the holy grail of marketing. Simply stated, communicate the most relevant offer to the right person and you will increase sales. To achieve this, you must understand the individual. Consequently, digital marketers developed many ways to gather and leverage customer information to deliver targeted experiences. In his session at @ThingsExpo, Lou Casal, Founder and Principal Consultant at Practicala, discussed how the Internet of Things (IoT) has accelerated our abilit...