STAMFORD, Conn., Jan. 10, 2018 /PRNewswire/ -- The global
sourcing market produced its best quarter ever in the fourth
quarter, capping a record year that saw the combined market surge
15 percent on strong demand for cloud-based as-a-service sourcing
and modest growth in traditional sourcing, the latest state-of-the
industry report from Information Services Group (ISG) (Nasdaq:
III), a leading global technology research and advisory firm,
shows.
Data from the ISG Index™, which measures commercial outsourcing
contracts with annual contract value (ACV) of $5 million or more, show full-year ACV for the
combined global market (including both as-a-service and traditional
sourcing) climbed 15 percent, to a record $43.3 billion, driven principally by a 36 percent
jump in the as-a-service segment, to $18.7
billion. Although traditional sourcing was up 3 percent for
the year, to $24.6 billion, it
reached $6 billion in ACV – a sign of
a robust market – in three of the four quarters. Notably, there was
a record number of contracts awarded in 2017, and even an uptick in
the number of mega-deals (those worth $100
million or more annually), an especially encouraging sign in
an era marked by a greater volume of lower-value contracts of
shorter duration.
The fourth quarter of 2017 was a record-breaker for as-a-service
sourcing, which, at $5.3 billion, was
up 26 percent and surpassed $5
billion in ACV for the first time. Both
Infrastructure-as-a-Service (IaaS), with ACV of $4.1billion, up 30 percent, and
Software-as-a-Service (SaaS), with ACV of $1.2 billion, up 12 percent, reached quarterly
highs. This strong demand, coupled with solid 8 percent growth in
traditional sourcing, to $6.0
billion, meant the combined market reached a record high of
$11.3 billion and surpassed the
$10 billion quarterly ACV mark for
only the fourth time in history.
"The global sourcing market has never been healthier," said
Steve Hall, partner and president,
ISG. "The past year began and ended strongly in terms of
market value, and the demand for all things digital shows no signs
of abating, as enterprises embrace these new technologies not only
for increased efficiency, but to find new ways to grow and get
closer to their customers. The seemingly insatiable digital demand,
marked most notably by the dramatic move of infrastructure and
software services to the cloud, is driving overall market growth,
but traditional sourcing is also growing, thanks in large measure
to improving economic conditions worldwide."
In traditional sourcing, information technology outsourcing
(ITO) reached $19.0 billion for the
year, up 11 percent versus 2016, fueled by a record number (1,251)
of contract awards, most notably in the applications space.
Business process outsourcing (BPO), meanwhile, declined 17 percent,
to $5.5 billion. Within as-a-service,
IaaS reached a record $14.1 billion,
up 51 percent, while SaaS, at $4.6
billion, also established a new annual ACV record, but was
up only 3 percent from the prior year.
By industry, the largest sourcing markets in 2017 were financial
services, with ACV of $10.4 billion
(up 28 percent); manufacturing, with ACV of $6.8 billion (up 12 percent); and business
services, with ACV of $6.2 billion
(up 15 percent). Telecommunications and media, with ACV of
$4.8 billion, was down 7 percent from
the prior year.
Americas
The Americas turned in another strong performance in the fourth
quarter, generating combined-market ACV of $6.3 billion, up 28 percent from a year ago.
Growth came from both traditional sourcing (up 26 percent, to
$3.1 billion) and as-a-service
sourcing (up 30 percent, to $3.2
billion). It was the second consecutive quarter the Americas
generated traditional sourcing ACV of more than $3 billion, a level last seen in the first
quarter of 2012.
For the full year, the Americas produced a record-high combined
ACV of $23.1 billion, up 23 percent.
New annual records were established for both traditional sourcing
ACV ($11.8 billion, up 13 percent)
and as-a-service sourcing ACV ($11.3
billion, up 37 percent).
Europe, Middle East and Africa (EMEA)
The EMEA market, which fell sharply in the third quarter after
starting the year strongly, rebounded in the fourth quarter, up 27
percent sequentially from the prior quarter. Year-over-year,
however, EMEA, was flat with the prior year, with combined
fourth-quarter ACV of $3.8 billion in
2017. Traditional sourcing, at $2.4
billion, was down 11 percent versus the prior year. The UK
and DACH region (Germany,
Austria and Switzerland) turned in stronger results, but
their performance could not overcome weakness in France and Southern
Europe. Meanwhile, as-a-service sourcing, at a record
$1.4 billion regionwide, was up 27
percent.
For the full year, EMEA generated $15.3
billion in ACV, up 3 percent against 2016. Traditional
sourcing ACV of $10.4 billion was
down 8 percent, but as-a-service sourcing soared 41 percent, to
$4.9 billion.
Asia Pacific
Asia Pacific's combined ACV
came in at $1.25 billion for the
fourth quarter, up 16 percent. Traditional sourcing was up 30
percent, to $609 million, and
as-a-service sourcing reached a record high of $635 million, up 6 percent over the prior
year.
For the full year, Asia
Pacific's combined market produced a record $4.88 billion of ACV, up 19 percent, consisting
of $2.46 billion of as-a-service
sourcing, up 21 percent to an all-time high, and $2.42 billion of traditional sourcing, up 17
percent on a record number of contracts (201).
Forecast
"Looking ahead, we can't ignore the changes in the U.S. tax law
that greatly reduce the amount of taxes corporations will have to
pay," said Hall. "That will free up money to be invested in
projects and digital transformation. Digital transformation is all
but mandatory for enterprises to stay competitive, and that will
ensure that both IaaS and SaaS will flourish."
For 2018, on a global basis, ISG forecasts 20 percent-plus
growth in as-a-service sourcing, and 4 percent growth in
traditional sourcing.
About the ISG Index™
Now in its 61st consecutive quarter, the ISG Index™ provides a
quarterly review of the latest sourcing industry data and trends
for clients, service providers, analysts and the media. For more
than 15 years, 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 4Q 2017 ISG 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/research/research-detail-page/isg-index.
About ISG
ISG (Information Services Group) (Nasdaq: III) is a leading
global technology research and advisory firm. A trusted business
partner to more than 700 clients, including 75 of the top 100
enterprises in the world, ISG is committed to helping corporations,
public sector organizations, and service and technology providers
achieve operational excellence and faster growth. The firm
specializes in digital transformation services, including
automation, cloud and data analytics; sourcing advisory; managed
governance and risk services; network carrier services; technology
strategy and operations design; change management; market
intelligence and technology research and analysis. Founded in 2006,
and based in Stamford, Conn., ISG
employs more than 1,300 professionals operating in more than 20
countries—a global team known for its innovative thinking, market
influence, deep industry and technology expertise, and world-class
research and analytical capabilities based on the industry's most
comprehensive marketplace data. For more information, visit
www.isg-one.com.
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