There is increasing demand from enterprises for next-generation services given need to improve customer satisfaction and increase efficiency and effectiveness of service delivery.
DALLAS (PRWEB) June 01, 2017
Global services providers witnessed sluggish revenue growth in their legacy businesses, while their digital businesses grew remarkably between April 2016 and March 2017. During this period, digital-focused deals increased nearly threefold, with cloud application and analytics forming a major portion of digital deals. However, while there is increased focus on next-generation technologies and cloud services, deal volumes in traditional business processes and legacy infrastructure services remained stagnant for many of the leading service providers.
This trend was evident in Q1 2017 as well. Activity in the global services market witnessed a notable increase in Q1 2017 compared to Q4 2016 (383 deals to 367 deals, respectively), owing to a significant rise in ITO deals, while BPO transactions declined.
“There is increasing demand from enterprises for next-generation services given need to improve customer satisfaction and increase efficiency and effectiveness of service delivery. Service providers are accordingly making digital investments to adapt to changing market dynamics,” said Salil Dani, vice president at Everest Group. “Between April of 2016 and March of this year, we witnessed 40 acquisitions to expand digital capabilities, 140 alliances between providers and technology providers or startups, and the setup of 35 new centers and digital pods to help clients rethink their digital strategies. Unfortunately, this robust activity cannibalized traditional business services investments and resulted in a deceleration of service providers’ overall revenue growth to a compound annual growth rate of between 0 and 5 percent.”
These results and other findings are explored in “Market Vista™: Q1 2017.”
Market Vista: Q1 2017 includes data, analysis and insights on transaction trends, major outsourcing deals, global in-house center market dynamics, trends in offshoring, emerging destinations and service provider development (including latest development on next-generation technologies such as digital services). The report also includes Standard Locations Database, which tracks 23 leading offshore locations.
Other Key Takeaways
- While the overall outsourcing demand remained steady, there was a significant decrease in demand from the United Kingdom given the uncertainty with Brexit.
- GIC setup activity continues to remain high, led by engineering/R&D services.
- Delivery center setups increased in Asia Pacific relative to Nearshore Europe, reversing the previous year’s trend.
- Service providers have acknowledged the uncertainty due to U.S. visa reforms and have increased local hiring and overall onshore leverage to safeguard their businesses, especially in IT services.
- As the market shifts from arbitrage-first to digital-first in contract demands, leading providers are making fundamental changes to their talent and service delivery models.
About Everest Group
Everest Group is a consulting and research firm focused on strategic IT, business services, and sourcing. We are trusted advisors to senior executives of leading enterprises, providers, and investors. Our firm helps clients improve operational and financial performance through a hands-on process that supports them in making well-informed decisions that deliver high-impact results and achieve sustained value. Our insight and guidance empower clients to improve organizational efficiency, effectiveness, agility and responsiveness. What sets Everest Group apart is the integration of deep sourcing knowledge, problem-solving skills and original research. Details and in-depth content are available at http://www.everestgrp.com.
Andrea M. Riffle, Everest Group
Robert Cathey, Cathey Communications for Everest Group