Spending Trends from the Momentum® 2013 Verticals Report


The 2013 Momentum® Market Trends & Insights Report draws findings from hundreds of client engagements and thousands of data points across 27 different industries. A subset of this larger report, the Vertical Industries Report offers an analysis of spending within specific vertical industries. Though ISG found no net change in year-over-year spending, the full story for the market proves to be more complex. Annual spending fell as much as 36 percent in one industry and rose 17 percent in the top-growth vertical. The following are the Top 5 findings from the recently published report.

1. Financial services remain hot on hunting and farming measures. The financial industry verticals, including banking, insurance and diversified financials, experienced some of the highest gains in outsourcing spending and new adoption in the past year. Financial services firms are likely to increase spending as they try to reach the large unbanked population in the emerging markets and deliver more convenience to existing customers. Opportunity for hunting exists, as well, with more first-time outsourcers coming to the market in the financial services industry. Positive macroeconomic indicators, such as improving capital markets, also support this growth.

2. Retail and utilities verticals are gaining momentum. Over the past three years, clients in utilities saw an increase of 19 percent in average annual outsource spending while clients in retail saw an increase of 12 percent. Utilities sector clients are on a path to further increased spending given necessary expenditures, such as infrastructure upgrades and smart grid technology projects that were on hold during prior periods of fiscal restraint. Accelerated M&A activity in the utility sector also faces clients who are under heavy cost and margin pressure. Retail clients are focusing on digital strategic initiatives with a mix of physical and online channels to improve their online activity and mobile marketing. ISG observes careful evaluation of service providers for these niche capabilities.

3. Specialists are wanted. More and more, clients want to work with experts and specialists within their vertical industries to reduce the risk of outsourcing. The thinking is that a specialist can provide specific industry experience and ensure that proposals meet client’s business objectives. In order to split project scope and create carve-outs for engaging with experts, clients are willing to work with small, specialized firms and are signing more contracts with best-of-breed service providers.

4. New drivers motivate clients. In addition to increasing savings, many clients hope to use outsourcing to improve the agility and scalability they need to meet demand fluctuations. Scalability proved especially important in verticals with strong exposure to consumer confidence.

5. Inconsistent demand greets emerging technologies. The notable “emerging” technologies, such as social media, mobile, cloud and Big Data, are penetrating very differently across different verticals. Clients with knowledge-based businesses, or those that have to support business scalability without escalating capital expenditure, are eager to embrace the cloud. Verticals sensitive to data and IP security (e.g. semiconductors and aerospace & defense) remain wary. Demand is fairly strong and consistent for analytics, though the applications vary significantly by industry.

Please contact Paul Reynolds for the comprehensive report or to learn more.

About the author

Paul Reynolds leads Momentum, a division of ISG that provides research services to help service providers better target, win and retain business. Paul has 25 years of market research experience with specific expertise in methodology development, data analytics and research process design. Having found many service providers’ Advisor Relations functions to lack appropriate analytics, Paul is working to develop innovative new approaches that allow for data-driven programs based on the unique needs of each client. His approach benefits Advisor Relations, go-to-market functions, sales, strategy, marketing, and market/competitive intelligence teams.