In Q1 outsourcing buyers favored Global In-house Centers and nearshoring; providers focused on disruptive technologies and public sector business.
DALLAS, May 19, 2015 — Outsourcing demand continues to remain sluggish in Q1 of 2015, according to Everest Group, an advisor to business leaders on the next generation of global services.
Transaction activity continued to decline for the third consecutive quarter, with a four percent decline from Q4 of 2014. Mid-tier service providers, which account for a large share of the outsourcing market, have felt the pinch in particular, and mega deals were absent in Q1, resulting in a 50 percent drop in average contract value.
Despite the industry’s grey skies, rays of encouraging news shine through in select locations such as Europe. Europe accounts for one-third of all GIC activity, and in Q1 2015 new setup activity in Europe surpassed that of Asia for the first time. Europe was leveraged especially by the manufacturing, distribution and retail (MDR) sector and local technology firms that took advantage of nearshore locations for research and development centers. In the near future, GIC activity is expected to increase in India, mainly on account of its qualified talent pool for R&D and engineering services.
Notable service provider developments in Q1 include moves by Cognizant, Infosys, TCS, and Wipro to find startups with the next big ideas. Another trend of note is exemplified by service providers such as Cognizant and TCS, which are looking to penetrate public sector business in the United Kingdom and United States.
These results and other findings are explored in a recently published Everest Group report: “Market Vista™ Q1 2015.” The report includes data, analysis and insights on transaction trends, major outsourcing deals, global in-house center market dynamics, trends in emerging offshore destinations, and service provider developments. The report also includes Standard Locations Database, which tracks 23 leading offshore locations.
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“A highlight of Q1 is that the overall GIC market continued to increase and is shifting toward getting better, thanks to persistent demand from adopters ” said Salil Dani, vice president at Everest Group. “In particular, we are seeing GIC setups for IT and R&D/engineering work gaining traction, driven by the increased adoption of Social, Mobile, Analytics and Cloud—or SMAC—technologies.”
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