ISG Momentum® Market Trends & Insights 2018 Annual Report


There was widespread strength in the outsourcing market in 2018 with increases in ITO and BPO contract awards, high client-penetration levels, and a moderation in some of the negative long-term trends. ISG uncovered heavy pilot project activity in many segments, which could signal expanded activity in 2019. Here are some chapter-by-chapter report highlights:

  • Even though average outsourcing contracts continue to become smaller, volume is not suffering. A record 1,726 contracts worth at least $5 million were issued in 2018. Annual contract volume has increased 25 percent over the past five years.
  • Outsourcing penetration among Forbes® Global 2000 companies remained at the all-time high level reached in 2018: 68 percent. Nearly half the companies in the lowest quartile of the G2000 (1,501 – 2,000) are now outsourcing.
  • BPO contract volume rose 24 percent in 2018, and ITO volume was up 4 percent because of strength in the Americas region. High-growth service lines included ADM and financial services outsourcing.
  • The total contract value (TCV) in the market declined slightly in 2018, and at $95.2 billion was at the second-lowest level of the past decade.
  • Among industries, retailing produced the most year-over-year percentage growth in TCV, 127 percent, which represented a net gain of $2.7 billion. Insurance had the largest overall net gain, $4.6 billion, followed by health care equipment and services with $3.4 billion in growth.
  • There are 1,407 outsourcing contracts due to expire in 2019, which are collectively worth $25 billion. Both figures are down from recent years but represent a significant replacement market opportunity. About a third of the expiring contracts are for ADM services.
  • Responsiveness and the ability to collaborate have become two of the most important attributes that clients use to select and rate service providers, and many providers did not get high customer satisfaction ratings in a recent ISG study.
  • Emerging 5G wireless technology will get more attention than actual adoption in 2019, because the infrastructure and business cases for using 5G are not well developed. However, there will be many enterprise pilot projects.
  • Our examination of the state of blockchain in the enterprise recommends a three-phase approach that client organizations and service providers can follow to create sustainable business value.
  • We also examine the multi-cloud IT architectures that are becoming commonplace and highlight the current opportunities and challenges they present for service providers.
  • Coactive governance is emerging as an evolved way to govern sourcing transactions to promote more value and collaboration. It is well suited for enterprises that are trying to transform. This report offers a brief overview of coactive governance and why it is a fit for modern sourcing. The following chapters present more details and supporting data.
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