Welcome!

News Feed Item

Asia Pacific Sees Rise in Second-Half Contracts, But Value is Flat with First Half: ISG Outsourcing Index

2013 consistent with 2010-2011, but down sharply from standout 2012;

BANGALORE, India, Feb. 10, 2014 /PRNewswire/ -- Information Services Group (ISG) (NASDAQ: III), a leading technology insights, market intelligence and advisory services company, said today the number of outsourcing contracts awarded in the Asia Pacific region rose in the second half of 2013, but annual contract value remained flat with the first half, suggesting a trend toward smaller deals, a pattern consistent with activity globally and in other regions.

According to the ISG Outsourcing Index for Asia Pacific, which measures commercial contracts with an annual contract value (ACV) of $5 million or more, ACV totaled $1 billion for the second half, same as the $1 billion recorded in the first half.  Full-year ACV of $2 billion was down 80 percent from the standout year of 2012, but consistent with prior years.

Similarly, the total number of contracts for the year, 126, was down from 2012 but broadly in line with the volume of contracts in the 2009-2011 period.  The volume of activity did, however, pick up in the second half of 2013, as the number of deals rose 7 percent compared with the first six months of the year.

The steep decline in the ACV was due principally to a sharp drop in the number of large-scale contracts awarded in 2013.  Last year, only three contracts valued at between $40 million and $99 million were awarded, compared with 12 in 2012.  Most Asia Pacific contracts fell into the $5-million-to-$39-million range, but the number of those contracts, like that of the large-scale deals, was down for the year.

"The year 2012 was the best ever for outsourcing in Asia Pacific, but it looks now to be an aberration, rather than the beginning of a new era," said Sid Pai, partner and president, ISG Asia Pacific.  "Although 2013 pales in comparison, it was more truly representative of the long-term trend in the region.  Indeed, the value of both mega deals and sub-$40 million contracts in 2013 were in line with their five-year averages."

Pai pointed out that the number of contracts awarded in the last decade has grown by 50 percent, while ACV has remained remarkably consistent.  "Clearly, deal value is getting smaller, as clients take advantage of lower service costs and increased competition, while moving toward multi-sourcing environments.  The work that was awarded to a single vendor in the past is now being split up among multiple service providers offering specialized capabilities."

From an industry standpoint, the best performing sectors were Travel, Transport and Leisure and Healthcare and Pharmaceuticals, both of which saw an increase in ACV for the year that put them near their five-year averages.  On the other hand, Asia Pacific's historically strongest sector, Media and Telecommunications, had its worst year ever, down almost 80 percent from 2012, due to a sharp falloff in mega relationships.  Financial Services also was down, as the number of contracts signed dropped to its lowest level since 2008, as was Manufacturing, even though the sector returned to historical levels.

Among the sub-regions, the only one to show growth was Japan.  Although contract numbers declined slightly, ACV in Japan reached $380 million, its highest level since 2007.

India, the region's largest sub-region, was also its biggest underperformer, as ACV tumbled from $1.4 billion in 2012 to only $400 million last year, with the large business process outsourcing (BPO) contracts of 2012 essentially disappearing.  Contract counts also fell to a six-year low, as economic and political uncertainties caused companies to delay outsourcing decisions until after the April elections.

Election considerations also were a major factor in the Australia-New Zealand sub-region, where ACV declined for a second consecutive year despite a steady volume of deals.  Now in the slower summer months, soft conditions should persistent there through mid-2014.

In terms of deal scope, information technology outsourcing (ITO) saw a 24 percent jump in ACV in the second half, compared with the first six months of the year.  That strong performance meant full-year ACV was down only 5 percent, and within historical range.  Correspondingly, activity in the second half was at all-time high for a half-year period, with 56 ITO contracts awarded, up 47 percent.  Infrastructure and Network Services were the big drivers.

The story was quite different on the BPO side, which saw a steep drop in value that accounted for the overall decline in Asia Pacific.  Less than $100 million in ACV was awarded in the second half, the lowest award value since 2005.

For the full year, ACV in BPO was down almost 80 percent and contract counts fell 42 percent, as the lack of large contracts, fewer and smaller deals overall, and the virtual disappearance of research-and-development and knowledge-process outsourcing work after a record 2012 combined to crater the market.

The longer-term picture looks brighter than the 2013 numbers would suggest, said Pai.  He noted that the region's annualized revenue from active outsourcing contracts – revenue now in the pipeline from both current-year and previous-year deals – has continued to rise, with a five-year compound annual growth rate (CAGR) of 4 percent.  The number of active contracts over that same period has risen at a CAGR of 10 percent.

"This measure smoothes out the bumpiness of the annual business cycle and reveals the true, long-term growth potential of this region," said Pai.

Now in its 45th consecutive quarter, the ISG Outsourcing Index (formerly the TPI Index) provides a quarterly review of the latest sourcing industry data and trends for clients, service providers, analysts and the media.  For more than a decade, it has been the authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider performance.

The Second-Half Asia Pacific ISG Outsourcing Index was presented during a conference call and webcast for media and analysts today.  To listen to an audio replay of the call and view presentation slides, please visit http://www.isg-one.com/web/research-insights/isg-outsourcing-index/.

About Information Services Group

Information Services Group (ISG) (NASDAQ: III) is a leading technology insights, market intelligence and advisory services company, serving more than 500 clients around the world to help them achieve operational excellence. ISG supports private and public sector organizations to transform and optimize their operational environments through research, benchmarking, consulting and managed services, with a focus on information technology, business process transformation, program management services and enterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, the deepest data source in the industry, and more than five decades of experience of global leadership in information and advisory services. Based in Stamford, Conn., the company has more than 800 employees and operates in 21 countries.

For additional information, visit www.isg-one.com.

Follow us on Twitter: https://twitter.com/ISG_News

Follow us on LinkedIn: http://www.linkedin.com/company/information-services-group

Follow us on Google Plus: https://plus.google.com/b/118326392175795521009/118326392175795521009/posts

 

SOURCE Information Services Group

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
Whether your IoT service is connecting cars, homes, appliances, wearable, cameras or other devices, one question hangs in the balance – how do you actually make money from this service? The ability to turn your IoT service into profit requires the ability to create a monetization strategy that is flexible, scalable and working for you in real-time. It must be a transparent, smoothly implemented strategy that all stakeholders – from customers to the board – will be able to understand and comprehe...
Complete Internet of Things (IoT) embedded device security is not just about the device but involves the entire product’s identity, data and control integrity, and services traversing the cloud. A device can no longer be looked at as an island; it is a part of a system. In fact, given the cross-domain interactions enabled by IoT it could be a part of many systems. Also, depending on where the device is deployed, for example, in the office building versus a factory floor or oil field, security ha...
Between 2005 and 2020, data volumes will grow by a factor of 300 – enough data to stack CDs from the earth to the moon 162 times. This has come to be known as the ‘big data’ phenomenon. Unfortunately, traditional approaches to handling, storing and analyzing data aren’t adequate at this scale: they’re too costly, slow and physically cumbersome to keep up. Fortunately, in response a new breed of technology has emerged that is cheaper, faster and more scalable. Yet, in meeting these new needs they...
When it comes to cloud computing, the ability to turn massive amounts of compute cores on and off on demand sounds attractive to IT staff, who need to manage peaks and valleys in user activity. With cloud bursting, the majority of the data can stay on premises while tapping into compute from public cloud providers, reducing risk and minimizing need to move large files. In his session at 18th Cloud Expo, Scott Jeschonek, Director of Product Management at Avere Systems, discussed the IT and busin...
An IoT product’s log files speak volumes about what’s happening with your products in the field, pinpointing current and potential issues, and enabling you to predict failures and save millions of dollars in inventory. But until recently, no one knew how to listen. In his session at @ThingsExpo, Dan Gettens, Chief Research Officer at OnProcess, discussed recent research by Massachusetts Institute of Technology and OnProcess Technology, where MIT created a new, breakthrough analytics model for s...
"We are the public cloud providers. We are currently providing 50% of the resources they need for doing e-commerce business in China and we are hosting about 60% of mobile gaming in China," explained Yi Zheng, CPO and VP of Engineering at CDS Global Cloud, in this SYS-CON.tv interview at 19th Cloud Expo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
In his general session at 19th Cloud Expo, Manish Dixit, VP of Product and Engineering at Dice, discussed how Dice leverages data insights and tools to help both tech professionals and recruiters better understand how skills relate to each other and which skills are in high demand using interactive visualizations and salary indicator tools to maximize earning potential. Manish Dixit is VP of Product and Engineering at Dice. As the leader of the Product, Engineering and Data Sciences team at D...
Keeping pace with advancements in software delivery processes and tooling is taxing even for the most proficient organizations. Point tools, platforms, open source and the increasing adoption of private and public cloud services requires strong engineering rigor - all in the face of developer demands to use the tools of choice. As Agile has settled in as a mainstream practice, now DevOps has emerged as the next wave to improve software delivery speed and output. To make DevOps work, organization...
"We are a custom software development, engineering firm. We specialize in cloud applications from helping customers that have on-premise applications migrating to the cloud, to helping customers design brand new apps in the cloud. And we specialize in mobile apps," explained Peter Di Stefano, Vice President of Marketing at Impiger Technologies, in this SYS-CON.tv interview at 19th Cloud Expo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
"We're a cybersecurity firm that specializes in engineering security solutions both at the software and hardware level. Security cannot be an after-the-fact afterthought, which is what it's become," stated Richard Blech, Chief Executive Officer at Secure Channels, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
In this strange new world where more and more power is drawn from business technology, companies are effectively straddling two paths on the road to innovation and transformation into digital enterprises. The first path is the heritage trail – with “legacy” technology forming the background. Here, extant technologies are transformed by core IT teams to provide more API-driven approaches. Legacy systems can restrict companies that are transitioning into digital enterprises. To truly become a lead...
In IT, we sometimes coin terms for things before we know exactly what they are and how they’ll be used. The resulting terms may capture a common set of aspirations and goals – as “cloud” did broadly for on-demand, self-service, and flexible computing. But such a term can also lump together diverse and even competing practices, technologies, and priorities to the point where important distinctions are glossed over and lost.
Video experiences should be unique and exciting! But that doesn’t mean you need to patch all the pieces yourself. Users demand rich and engaging experiences and new ways to connect with you. But creating robust video applications at scale can be complicated, time-consuming and expensive. In his session at @ThingsExpo, Zohar Babin, Vice President of Platform, Ecosystem and Community at Kaltura, discussed how VPaaS enables you to move fast, creating scalable video experiences that reach your aud...
All clouds are not equal. To succeed in a DevOps context, organizations should plan to develop/deploy apps across a choice of on-premise and public clouds simultaneously depending on the business needs. This is where the concept of the Lean Cloud comes in - resting on the idea that you often need to relocate your app modules over their life cycles for both innovation and operational efficiency in the cloud. In his session at @DevOpsSummit at19th Cloud Expo, Valentin (Val) Bercovici, CTO of Soli...
"Once customers get a year into their IoT deployments, they start to realize that they may have been shortsighted in the ways they built out their deployment and the key thing I see a lot of people looking at is - how can I take equipment data, pull it back in an IoT solution and show it in a dashboard," stated Dave McCarthy, Director of Products at Bsquare Corporation, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.