market growth

We’ve used annual contract value (ACV) as the primary metric to report on the IT and business services market for over a decade. It represents the best measure of activity and overall health of the market.
 
The great news is that managed services ACV is currently on the rise. As we discussed on the 2Q21 Index call, managed services had its best quarter ever at nearly $8 billion in ACV. This was up 24% Y/Y and up 11% over 2Q19.
 
But it’s also important to remember that a portion of this spike in ACV was due to pent-up Covid demand. Now that this demand has been released, ACV levels will likely start to come back down to Earth. That’s why we’re forecasting 9% growth in managed services for the full year.
 
There is a phenomenon in American baseball called the “Plexiglass Principle,” which basically says that teams that improve one season tend to decline the next. Same goes for individual players. Essentially, it’s that, over time, things regress to the mean.
 
And that’s exactly what you can see below in the Data Watch section. While there have been ACV spikes over the past 10 years, over time, ACV growth tends to regress to the mean.
 
We’ll be discussing this and the next big sources of growth in our industry next week at the Sourcing Industry Conference in Dallas, and on our 3Q21 Index call on the 12th. We hope to see you there!

Data watch

automation

This week Blue Prism agreed to a deal with private equity firm Vista Equity Partners for $1.5 billion. I turned to my colleague Tracy Lipasek – who is helping some of the biggest companies in the world scale their automation programs – for her POV. The Blue Prism sale itself is not a significant surprise to those knee-deep in automation. After pioneering the RPA market in 2001, Blue Prism has been trailing UiPath and Automation Anywhere for some time.
 
In 2019, Blue Prism acquired Thoughtonomy in an effort to pivot to the cloud. But this did not generate the expected benefit, and today Blue Prism is still playing catchup behind the market leaders.
 
The bigger news in this story may be that Vista intends to transfer Blue Prism to its portfolio company TIBCO, which is focused on data integration, unification and analytics. This is an innovative and visionary move. RPA is just one tool in a very large toolchest of automation and digitization capabilities; the real power of automation comes into play when companies take several tools from the “digital toolbox” and integrate them to optimize business outcomes.
 
Many organizations use RPA to move data from one place to another; data normalization and standardization is also a common benefit with RPA. Melding Blue Prism with TIBCO could yield a very powerful solution for clients looking for a way to harness the power of data on their digital transformation journey.

deal activity

M&A

Stay safe and have a great weekend!
 
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isg insiders

Stanton Jones, Alex Bakker, Cynthia Batty, Dr. Daniel Gerster, Doug Saylors, Missy Lawrence-Johnson, Mrinal Rai, Ron Exler, Sashidharan Balasundaram, Steve Hall, Sunder Sarangan, Troy Williams

contributing this week

Tracy Lipasek, Gowtham Kumar