ISG Momentum® Market Trends & Insights - ITO Pricing Trends
Service provider prices for almost all ITO services were down in 2020 compared to the previous year, with only collaboration application rates rising. Most service line price decreases were 9 percent or less, while collaboration application prices increased between 2 percent and 6 percent.
ISG observes continual shifts in the global business environment driven by investments spread across a range of technologies. The economic shifts and cultural preferences are changing the way businesses spend on technology and outsourcing. The internal IT organization’s role also continues to evolve. Clients want to reduce costs as much possible and channel their funds to support digital and other development initiatives.
With traditional savings sources such as labor arbitrage already tapped, enterprise clients are increasingly putting pressure on their service providers to reduce prices. The providers are lowering prices, as our data shows, even though they have some of the same reduction limitations as their clients.
Service providers are continuously innovating to pass on cost savings to their clients. ISG observes that technology developments that are enabling service providers and enterprises to hold the line on costs include increased cloud use, hyperconverged infrastructure, more maturity in software-defined networks (SDNs) and a range of automation innovations.
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