Improved Business Sentiment Drives 11% Jump in US Outsourcing Deals in Q1, According to Everest Group Findings

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Cloud, automation and analytics lead in digital-focused outsourcing deals, which dominate outsourcing activity with a 65 percent share.

Outsourcing activity remained steady in Q1 as compared to the previous quarter, with a growth in information technology outsourcing as well as increases in several verticals, including retail and consumer product goods, technology and communication, and healthcare

North America witnessed a significant increase in outsourcing transaction activity in Q1 2018 as compared to 4Q 2017, with 115 deals recorded as compared to 103, respectively, according to Everest Group. This increase can be attributed to an improved business sentiment in the U.S. as well as an increase in outsourcing demand across healthcare and manufacturing verticals.

For the first time, the number of new centers supporting digital skills surpassed new centers supporting only traditional services. Among global services transactions overall, digital services continued to dominate the outsourcing activity in Q1, similar to the previous quarter. The share of digital-focused transactions increased from 61 percent in Q4 2017 to 65 percent in Q1 2018 vis-à-vis the pure traditional services, which showed a decline in adoption over the past quarter.

Among all outsourcing transactions, 50 percent included cloud, 21 percent included automation, 14 percent included analytics, 13 percent included mobility, 7 percent included cyber-security and 30 percent included some other form of digital service, such as social media, Internet of Things (IoT) or blockchain.

Other key global services market trends noted for the quarter include the following:

  • Global in-house center (GIC) expansions are at a seven-year high, as mature GICs added next-generation technologies (especially big data analytics, cloud and IoT capabilities) in their service delivery.
  • The industry saw a secular increase in the number of new centers supporting R&D/engineering services, driven by the need for innovation and customer-centricity.
  • Service providers are actively looking for partnerships with startups (as opposed to acquisitions) to leverage them for niche capabilities.

These findings and more are discussed in Everest Group’s recently released report, released Market Vista™: Q2 2018. The report discusses outsourcing transaction trends, GIC-related developments, global offshoring dynamics, location risks and opportunities, and key service provider developments.

“Outsourcing activity remained steady in Q1 as compared to the previous quarter, with a growth in information technology outsourcing as well as increases in several verticals, including retail and consumer product goods, technology and communication, and healthcare,” said H. Karthik, partner at Everest Group. “New GIC setups, which reached an all-time high in Q4 2017, declined slightly, but GIC expansions are at a seven-year high. All-in-all, Q1 was a good quarter for service providers—both global as well as offshore-heritage service providers—with most reporting sequential growth in revenue and an increase in operating margins.”

***Complimentary Webinar Offers Q1 Review Plus Bonus Topic—“War for Talent: Impact on Talent Acquisition Strategies”***

Everest Group hosted a webinar on May 22—Q2 2018 Market Vista™ Update and Implications on Talent Acquisition with Intensifying War on Talent—in which the findings of the “Market Vista: Q2 2018” report were reviewed. During this 45-minute webinar, Everest Group experts discussed the most impactful events in the global services industry thus far in 2018 and looked ahead to how these events likely will shape the rest of the year.

The webinar also addressed talent acquisition strategies, including the factors impacting talent models and the resulting implications and imperatives for employers. The impact of automation on transactional jobs and the redesign of the employee value proposition to reach a predominantly millennial workforce are two of the key topics covered in the discussion.

*** Watch the Webinar Replay *** (The webinar slide deck also is available for complimentary download with registration.)

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.

Contact:
Andrea M. Riffle, Everest Group
andrea.riffle(at)everestgrp.com

Jennifer Fowler, Cathey Communications for Everest Group
+1-865-405-6380
jennifer(at)cathey.co

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