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Number of IT Outsourcing Contracts Reaches All-time High

by: Sarah Joson

Tuesday, November 4, 2014 |

CIO.com recently shared the highlights of the 2014 Q3 Outsourcing Index report created by outsourcing consultancy firm Information Services Group (ISG).

One of the highlights found in the report is the continuous increase of the multisourcing delivery model where clients source IT processes to several different providers.

ISG pointed out that multisourcing fuelled the volume of IT outsourcing contracts in the US, reaching an all-time high through the first three quarters of 2014.

According to ISG President John Keppel, established buyers from the US and the UK are the pioneer adopters of multisourcing, and are said to be more comfortable in applying the delivery model. On the other hand, newer markets that are used to the single provider model are increasingly seen moving toward multisourcing.

The multisourcing environment in the global market and individual market are very different. Keppel said both vary in paces, models, and even cultural factors that can affect the procuring process.  He noted that although multisourcing is increasing globally, the degree of multisourcing depends on the specific market. As for the large multinationals, they are seen using the portfolio approach in outsourcing where internal capabilities are integrated with consultants, offshore providers, and consultants.
The report was also able to establish that in the US, the value of business process outsourcing (BPO) contracts climbed 17 percent and annual contract values (ACV) for IT outsourcing deals in the country increased by almost 20 percent.

However, Keppel noted that the overall value and volume of contracts in the larger market decreased. The first six months were proven to be impressive for the market, but they saw a year-over-year and quarter-over-quarter dips for the third quarter, which the data verified. For instance, companies forged $6 billion in deals in back-to-back quarters to start the year, making it hard to beat in the following quarters. True enough, the annual contract values and numbers of deals declined.

ISG expected a double-digit growth for the outsourcing market this year, with 2014ís broader market positioned 13 percent ahead of 2013ís pace. Keppel said the brewing transaction activity in the market could be sealed and rolled out in the coming quarters. 

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