Earlier today we took a close look at the state of the outsourcing market on the 2Q13 Global ISG Outsourcing Index conference call and webcast:
Across the board, the numbers are undoubtedly discouraging. However, some positive signs in the market suggest we’ll see a rebound of activity in the second half of the year.
Overall, we saw declines in both ITO and BPO contract activity, as well as a drop-off in large deals and within several key industry sectors. Mega-relationships – deals with ACV of greater than $100 million – dipped significantly, while smaller deals also showed weakness. Traditionally strong industries such as Financial Services, Telecom and Manufacturing lagged as well.
The BPO segment – a consistently strong performer – fell by about a quarter in terms of contract value. However, a healthy level of new scope activity suggests the downturn is a blip rather than a long-term trend, and we see continued confidence in this space. Also, the industry sectors of Telecom & Media, as well as Travel and Transport & Leisure, stood out as bright spots,
From a regional perspective, EMEA was hurt by a lack of large deals, and registered its lowest ACV total since 2009. The UK and DACH markets were most responsible for the downturn, while other sub-regions, particularly the Nordics, showed strong half-year performances.
In the Americas, both ACV and the number of contracts awarded dipped significantly. A contributing factor was a recession-driven lag in the renewal market.
Asia Pacific was down as well – but we have to consider that last year was the region’s best ever, so the comparison is somewhat skewed.
So, the picture is by no means bright. That said, we anticipate a much stronger second half to the year. Service provider pipelines are up above levels of six months ago, and providers report feeling more confident than in years past.
Stay tuned, as we’ll be watching closely in the months ahead to see how these indicators develop further. What are your thoughts on the current trends and how do you see the remainder of 2013?
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.
