Outsourcing Demand Shrinks for Third Consecutive Quarter, According to Everest Group Report on Top Trends in Global Sourcing | Press Release

Posted On December 5, 2019

Bright spots in global sourcing for Q3 include GIC setups, digital services and revenues for offshore heritage providers.

The global sourcing industry posted a 6.7% decline in transactions in the third quarter of 2019, dropping to 444 transactions from 476 transactions recorded in Q2, according to Everest Group. This marks the third consecutive quarter of declining transactions in 2019. From a year-on-year perspective, transactions declined 15.6% from 526 in Q3 2018 to 444 in Q3 2019.

Everest Group also reports these Q3 statistics indicating suppressed growth in the global sourcing market:

  • The total spending on outsourcing contracts fell across the US and Europe (especially the UK) owing to global recessionary sentiments.
  • Offshore heritage service providers have announced considerable layoffs in this quarter to streamline their delivery pyramids and reduce costs.
  • The revenue for global services providers decreased marginally.
  • Both merger and acquisition (M&A) and alliance activity witnessed a decline.

However, within the global outsourcing activity for Q3, a few bright spots appeared:

  • India witnessed growth in activity driven by an increase in new global in-house center (GIC; also known as shared services center) setups, specifically for supporting engineering and digital-focused services.
  • The volume of digital-focused new centers increased both in the onshore as well as the offshore region, with artificial intelligence (AI) continuing as the leading segment across both regions. The activity was largely driven by India and China in offshore/nearshore regions and by the United States in the onshore region.
  • Technology and communication remained the most active sector in offshore/nearshore and onshore locations and accounted for 63% and 50% of total new center setups, respectively. During the quarter, the retail and consumer product goods (CPG) vertical gained traction in onshore locations with nine new setups, compare to four in Q2.

These global sourcing trends are detailed in Everest Group’s recently released Market Vista™: Q4 2019 report. The Market Vista report provides data and analysis highlighting the key trends in the fast-evolving offshoring and outsourcing market. Market Vista captures the key developments across outsourcing transaction trends, health of GICs, location risks and opportunities, and service provider developments.

Special Focus: Engineering/R&D Sourcing
The Market Vista: Q4 2019 report profiles outsourcing activity in the engineering/R&D space, including an overview of spending and a growth outlook across sectors. In 2018, the enterprises featured in the ER&D Top 200 across eight industries accounted for 56% of the overall ER&D spend globally. By sector, software vendors emerged as the highest spender ($127 billion), edging out the automotive sector, which led in 2017.

“In 2019, we expect the software product industry to remain in the top spot for ER&D spending, probably in the 15% growth range, as enterprise software vendors continue to explore offerings around emerging tech themes,” said H. Karthik, partner, Global Sourcing, at Everest Group. “The medical device sector is expected to experience the next highest growth rate in engineering/R&D spend, driven by software integration in medical devices and the growth of the wearables sector.”

***Download a complimentary 14-page abstract of the report***

About Everest Group
Everest Group is a consulting and research firm focused on strategic IT, business services, engineering 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 empowers 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.

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