ISG Momentum® Sourcing Digest April 2020
20 Apr 2020
by Paul Reynolds
2019: An Unusual Year for Outsourcing Activity
- Volatility is the best word to describe 2019 outsourcing activity among large enterprise clients. Many services, regions and individual countries had significant year-over-year changes in their volume of contracts awarded, total contract value (TCV) and annual contract value (ACV). Worldwide, the combined total of ITO and BPO contracts signed during 2019 fell by 25 percent and was down at least 20 percent in Europe, North America and Asia Pacific. Global ACV fell 17 percent, but the TCV rose 3 percent. ITO contract volume fell 34 percent but BPO rose 4 percent.
- There were similar swings and inconsistencies across industries, geographies and service lines. Fourteen of the 27 specific vertical industries tracked had positive or negative compound annual growth rates of at least 20 percent for the most recent four-year period. Manufacturing produced more contract awards than any other segment in 2019, but only two of its 11 verticals have positive four-year compound annual growth rates.
- Six individual BPO service lines topped $1 billion in TCV in 2019. BPO awards and spending were down in North America but soared in Europe and the Asia Pacific region.
- Inconsistency was also prevalent in the ITO market. ITO contract volume also fell in North America, but TCV increased by more than $10 billion. Volume, TCV and ACV were all down at least 21 percent each in Asia Pacific and Europe.
- Within Europe, outsourcing was strong in the U.K. but notably weaker in Western Europe. The Asia Pacific region had similar disparities. The East Asia segment comprised of China, Hong Kong, Japan and South Korea had a 64 percent drop in ACV, while the sector led by Australia and India had TCV growth that was even more dramatic.
- Overall, 58 percent of Forbes® G2000 companies were outsourcing in 2019. Twenty percent of the contracts signed during the year, and 42 percent of the ACV, resulted from restructuring agreements for contracts that were already active.
- Patterns were hard to find, and data-based predictions are even harder to make. The following sections present data that document 2019 activity and set the state of the outsourcing market coming into 2020.
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