Today we had a good look at the state of the outsourcing market on the 1Q13 Global ISG Outsourcing Index conference call and webcast:
On the surface, the numbers are less than encouraging, but a different picture emerges when we dig a little deeper and put this quarter into the broader context.
Overall, the market continues to struggle to regain traction. The soft spots in ACV come mainly in the smaller deal space of $50M-$99M and in New Scope, where activity seems particularly sluggish. ITO performance is weak, and BPO remains the bright spot. While results in the first quarter were considerably softer than is typical, the news for the rolling 12 months is more encouraging. In addition, the large deal market was strong.
Regional performance showed variation, with Manufacturing bringing down the Americas, and the low number of contracts, particularly in ITO, will be something to keep an eye on. We were impressed with the BPO gains to see that sector rise above ITO in the region.
In EMEA, New Scope activity fell unexpectedly but Restructuring rose. Financial Services came in lower than normal. BPO ACV fell, but contract awards remained strong, maintaining the positive feel for the BPO market as a whole. Asia Pacific held steady, with ACV and activity both increasing Y/Y, and we saw positive results in Australia and New Zealand.
We’ll keep our expectations in check for 2Q13, as clearly there remains some softness in the overall market. That said, as we look out to the remainder of the year, we are seeing positive signs in the marketplace. The continued strength in BPO, now two years in the making; the continued positivity in the emerging markets over the last 12 months; and the impact of timing on deal flow so far this year, which we know from experience will eventually rebound, all point to a healthier outlook for the full year.
We will be watching closely in the months ahead to see how these market indicators develop. What are your thoughts on the current market trends and what do you predict the remainder of 2013 will exhibit?
About the authorJohn is a proven executive leader with strategic, transaction and post-transaction experience. John has helped many large, global enterprises introduce and cultivate innovation as a part of the transformation process. Many of John’s projects have led to groundbreaking transactions, particularly in the UK Life and Pensions market, where John is a sought after C-suite advisor in the strategic sourcing of insurance operations. John has also conducted significant transactions in both IT infrastructure and applications environments. As a Partner and President, he sits on the ISG Executive Board and leads ISG EMEA and Asia.
