by: Sarah Joson
Thursday, April 14, 2016 | Outsourcing News |
According to the Outsourcing Index released by technology insights and market intelligence and advisory services company ISG (Information Services Group), smaller deals, which are contracts worth $40 million or less, rose 40 percent to $4.1 billion. Contracts that underwent changes surged 48 percent to $2.8 billion. Also, the volume and value of outsourcing contracts across the globe increased during this year’s first quarter.
The ISG Outsourcing Index interprets data collected from commercial outsourcing contracts with an annual contract value (ACV) of $5 million or more and it found that the ACV for the first quarter of this year climbed 20 percent to $6.1 billion.
It was also discovered that Q1-2016 is the second quarter that saw a contract volume exceed the 400 mark with 404 deals. The first ever was Q2-2015 with a record volume of 446. Compared to last year, the volume of contracts is 32 percent higher, propelled by restructurings which make up 78 percent or 173 of the total number of deals. Also, information technology outsourcing (ITO) contracts grew 51 percent to 301 deals. On the other hand, only five mega deals (contracts that are worth $100 million and more) declined from last year’s seven.
During the last 12 months, ACV totaled $24.7 billion. This is the highest level in the last four years and volume peaked with 1,542 contracts.
ISG cited their forecast for this year, saying 2016’s first quarter did far better than 2015 with ACV surpassing $6 billion for the second quarter which is an indication of a healthy market flow.
John Keppel, Partner and President of ISG, further explained that there’s a balance between the volumes of new deals and restructured ones. This means that there are a lot of opportunities in the market. Moreover, even if the use of the cloud is gaining traction, strong growth in ITO value and volume proves that IT solutions are positively impacting multiple areas in the outsourcing sector.
The total value of ITO contracts in the first quarter grew 24 percent to $4.2 billion. Business process outsourcing deals climbed 12 percent to $1.9 billion, despite a slight decline in the volume of BPO deals.