ISG Outsourcing Index: Global Market Declined in Second Quarter
Annual contract value at $3.6 billion, down 27 percent from the previous
quarter, reflecting weakness in both new scope deals and large contracts
Positive market signs suggest rebound for 2H13
STAMFORD, Conn., July 11, 2013
STAMFORD, Conn., July 11, 2013 /PRNewswire/ -- Information Services Group
(ISG) (NASDAQ: III), a leading technology insights, market intelligence and
advisory services company, today released data showing the global outsourcing
market sagged in the first half of 2013.
The 2Q13 Global ISG Outsourcing Index, which measures commercial outsourcing
contracts with an annual contract value (ACV) of $5 million or more, totaled
$3.6 billion, a decline of 27 percent over the first quarter of 2013.
Half-year performance of $8.5 billion in awards was also down 27 percent from
a year ago.
The results reflected declines in both ITO and BPO contract activity, as well
as a drop-off in large deals and within key industry sectors.
"The second quarter numbers are certainly discouraging, with declining
activity across regions and industries," said John Keppel, President of ISG.
"That said, we see positive signs in the market that suggest a stronger
performance in the second half of 2013."
Now in its 43^rd consecutive quarter, the ISG Outsourcing Index (formerly the
TPI 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 2Q13 Global ISG Outsourcing Index tallied 208 contracts awarded in the
second quarter, a decline of 25 percent compared to the prior quarter. Only
five mega-relationship contracts (with ACV greater than $100 million) were
awarded, a drop of 52 percent from Q1 2013. These five mega-deal contracts had
a combined total of $700 million. Deals with ACV of less than $40 million also
showed weakness – with 186 such awards, down from 258 in the prior quarter.
Results for the IT outsourcing (ITO) segment of the market dropped sharply.
ACV for the quarter ($2.3 billion) and number of contracts (126) both declined
by 26 percent from the first quarter of 2013. Year-to-date performance of
$5.3 billion was down 27 percent from the first half of 2012. New scope
activity within ITO was $1.7 billion, which was on par with the prior quarter.
ITO restructuring ACV, with only $600 million in the quarter, dropped by half
to the lowest point since the second quarter of 2010. Traditionally strong
industries lagged, with Financial Services down 41 percent from the previous
quarter, while Telecom contracts dropped nearly two-thirds and Manufacturing
fell by half.
The BPO segment, at $1.3 billion in ACV, was down by 28 percent from the
previous quarter. The number of contracts fell less dramatically, by 23
percent sequentially. New scope contracts dominated activity, and at $900
million rose 7 percent over the prior quarter. The number of active contracts
in the $2 million to $5 million range has grown by 95 percent over the past
five years, and deals larger than $5 million grew by 73 percent over that
time. From an industry perspective, Telecom & Media, as well as Travel and
Transport & Leisure stood out as bright spots, while Manufacturing and
Financial Services lagged.
EMEA accrued $2.0 billion in ACV in the second quarter, down 16 percent
sequentially. The number of awards dipped to 109 from 133 during the quarter.
The region was hurt by a lack of large deals, and the 9 awards of over $40
million in ACV represented the weakest performance since the third quarter of
2010. Over the first half of 2013, EMEA registered $4.2 billion in ACV, the
lowest total since 2009. The UK and DACH markets were most responsible for the
downturn, while other sub-regions, particularly the Nordics, showed strong
In the Americas, ACV ($1.2 billion) and the number of contracts awarded (70)
both dropped 40 percent from the previous quarter. While contracts valued at
more than $40 million held steady, the number of deals under $40 million
declined sharply. One factor contributing to the overall weak performance was
a recession-driven lag in the renewal market. From a year-to-date
perspective, the Americas saw $3.3 billion in ACV awarded, down 30 percent
from a year ago.
In Asia Pacific, contract awards totaled $410 million in ACV, down 13 percent
from the prior quarter. The number of awards declined slightly, continuing a
four-quarter slide. Year-to-date, the region saw $880 million in ACV awarded,
down by half from last year, which was the best ever in the region and
therefore somewhat skews the comparison.
"Looking ahead, we anticipate a rebound of market activity," Keppel said.
"Service provider pipelines are up above levels of six months ago, and
providers report feeling more confident than in years past. Moreover, despite
the dip in BPO activity, long-term trends reveal an underlying confidence in
The 2Q13 Global 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
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 of global leadership in information and advisory
services. Based in Stamford, Conn., the company has more than 800 employees
and operates in 21 countries.
For additional information, visit www.isg-one.com.
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SOURCE Information Services Group (ISG)
Contact: Alex Kozlov, ISG, +1 617 558 3377, firstname.lastname@example.org; Jim
Baptiste, Matter Communications for ISG, +1 978 518 4527,
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