Rising enterprise demand for desktop services provides another bright spot in an otherwise sedate global sourcing market
The banking, financial services and insurance (BFSI) vertical segment of the global sourcing industry posted a 30% increase in transactions in the first quarter of 2020, reporting 116 deals compared to 89 in Q4 2019. According to Everest Group, this can be attributed to an increase in deals across North America as consumer demand for digital banking surged amid the COVID-19 pandemic. The BFSI vertical accounted for the largest share of deals during Q1 in both the information technology outsourcing (ITO) and business process outsourcing (BPO) markets.
Demand for desktop service also increased as enterprises looked to enhance workplace transformation services to enable and support a remote workforce.
Otherwise, Q1 activity in the global sourcing market was slightly depressed.
- In Q1 420 transactions were reported, down slightly from 424 in Q4 2019 and marking the fifth straight quarter of decline in total outsourcing market activity.
- The Global Business Services (also known as Global In-house Center) segment witnessed a significant decline in new center setups in both onshore and offshore locations owing to a substantial decrease in center setups by manufacturing companies in Europe and the Middle East and Africa (MEA) region. North America continued to dominate GBS activity in onshore locations, with new centers devoted primarily to engineering and business process services.
- Overall location activity saw a decline across both offshore and onshore geographies driven by a significant reduction in center setups in the European region, comprising Central and Eastern Europe (CEE), Rest of Nearshore Europe (RONE) and Western Europe.
- Activity across both tier-1 and tier-2/3 locations fell in Q1 2020 as compared to Q4 2019.
These global sourcing trends are detailed in Everest Group’s recently released Market Vista™: Q2 2020 report. Market Vista Q2 2020 includes data, analysis and insights on transaction trends, major outsourcing deals, Global Business Services (GBS) market dynamics, trends in offshoring from emerging destinations, and service provider developments (including latest developments on next-generation technologies such as digital services). The report also includes insights from the Standard Locations Database, which tracks 23 leading offshore locations.
Special Focus: COVID-19 Spillover Effect
The impact of the COVID-19 pandemic is being felt throughout the global sourcing industry. The Market Vista: Q2 2020 report includes a summary of key developments in 16 countries.
“The COVID-19 pandemic is very likely to lead to a global recession in the world economy, as nation-wide lockdowns have resulted in the collapse of value chains across sectors,” said report author Hrishi Agarwalla, practice director at Everest Group. “The global services industry is facing growing concerns in this downturn, particularly with respect to operating challenges such as employees’ inability to work remotely (especially in offshore locations), disrupted supply chains, and a larger proportion of benched employees. These challenges will certainly impact revenue growth and will add to cost pressures that will be visible in the next quarter. Hence, enterprise and service providers would be compelled to reassess their global sourcing strategy and increasingly leverage newer technologies during these harsh and testing times.”
For more information about the impact of COVID-19 on global sourcing, visit Everest Group’s COVID-19 page for complimentary access to a Global Service Delivery tracker, recent reports, webinars, and more.
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.