Enterprise perspectives on the 2019 global services market: five things to know – automation, business models, talent challenges, budget centers, and sourcing models / provider mix
Enterprise perspectives on the 2019 global services market: five things to know – automation, business models, talent challenges, budget centers, and sourcing models / provider mix
Digital services continued to dominate outsourcing activity, driven by cloud-based deals
The global sourcing industry posted healthy numbers for Q3 2018, marked by notable increases in outsourcing demand, according to Everest Group. The total contract value of outsourcing transactions rose 11 percent from Q2 to Q3.
Digital services continued to dominate the outsourcing activity, driven by cloud-based deals. Among GIC setups, the share of digital services as compared to traditional services increased from 44 percent in Q2 to 56 percent in Q3. Likewise, a focus on digital continued to dominate both service providers’ acquisitions (73 percent) and partnerships (84 percent) landscape. Both enterprises and service providers are increasingly leveraging disruptive technologies such as artificial intelligence (AI) and machine learning (ML) to build more a strategic digital agenda, drive innovation and focus on value-added services.
Everest Group discusses these and other third-quarter developments in the sourcing industry in its recently released Market Vista™: Q4 2018 report. The quarterly report highlights the trends in the fast-evolving global sourcing market, exploring the key developments across outsourcing transactions and Global In-house Centers (GICs), as well as location risks and opportunities, and service provider developments.
“The global services industry has enjoyed three consecutive quarters of growth in 2018,” said Salil Dani, vice president at Everest Group. “In Q3, transaction activity rose, and the volume of new contracts increased significantly. Although Q3 did see a decline in GIC market activity in comparison to Q2, we continue to expect healthy growth of the overall global services market through the remainder of the year.”
Additional highlights from the Market Vista: Q4 2018 report:
***Download a complimentary 16-page abstract of the report findings here.*** (Registration required.)
Presentation originally aired on Wednesday, August 29, 2018 | 9 a.m. CDT, 10 a.m. EDT, 3 p.m. BST, 7:30 p.m. IST
It’s Q3 already?! It seems like just yesterday we were making final adjustments to our 2018 plans, and yet here we are beginning to consider the year that’s been while looking ahead to 2019. With that sentiment in mind, Everest Group conducted a brief survey with leading service providers on their market perspectives for the remainder of 2018 and into 2019.
We invite both service provider and enterprise executives to join us for an insightful 60-minute session in which Everest Group industry experts will offer insights on the key issues service providers are facing, along with their market implications. In addition, we will also comment on global services developments in the second quarter of 2018, covering:
Who Should Attend
Enterprise executives, particularly those focused on outsourcing & vendor management and global in-house centers, will gain providers’ perspectives on several of the key aspects of their client relationships (e.g., key budget center, benefits from digital initiatives) and key implications for their sourcing strategies.
Chief Research Guru
Practice Director, Global Sourcing
Vice President, Global Sourcing
Senior Vice President
Sourcing center setups at all-time high in Q2, driven by increased location activity in Nearshore Europe, Middle East
The global sourcing industry experienced a lucrative Q2 2018, marking notable rises in outsourcing demand, setups of global in-house centers (GICs) and service provider revenues compared to Q1, according to Everest Group. In addition, Everest Group reports that overall location activity was at an all-time high (87 setups of delivery centers by GICs and service providers during the quarter) due to significant increases in Central and Eastern Europe (CEE) and the Middle East.
Everest Group discusses these and other second-quarter developments in the sourcing industry in its recently released Market Vista™: Q3 2018 report. The quarterly report highlights the trends in the fast-evolving global sourcing market, exploring the key developments across outsourcing transactions and Global In-house Centers (GICs), as well as location risks and opportunities, and service provider developments.
“We’re coming off a great second quarter for the global services industry as a whole,” said Salil Dani, vice president at Everest Group. “For starters, location activity was at an all-time high and transaction activity rose in comparison to Q1. More than two dozen of the world’s leading companies announced plans to expand or set up new centers, which is a strong indication that enterprises anticipate that the market will continue to validate their sourcing strategies in the near future. We expect that this positive momentum will continue through the remainder of the year, which suggests the global sourcing industry will post significantly improved metrics compared to 2017.”
Everest Group will review the findings of the “Market Vista: Q3 2018” report in a webinar to be held on Wednesday, August 29, at 9 am CDT. In addition, Everest Group presenters will address the results of a brief survey the firm recently conducted with leading service providers to gauge their market perspectives for the remainder of 2018 and into 2019. Register here for the complimentary, 60-minute webinar, “Service Provider Vantage Point, Plus Q3 2018 Market Vista™ Briefing.”
Additional highlights from the Market Vista: Q3 2018 report:
***Download a complimentary 14-page abstract of the report findings here.*** (Registration required.)
Outsourcing deals in the United States grew 11% in the first fiscal quarter of 2018, with cloud, automation, and analytics accounting for 65% of outsourcing activity.
There were 115 deals in 1Q18, compared to 103 recorded in 4Q17, according to market analyst firm Everest Group.
The increase in outsourcing transactions was largely due to improved business sentiment in the US as well as the growing demand for service providers in healthcare and manufacturing sectors.
For the first time, the number of new global innovation centers (GIC) supporting digital skills surpassed centers supporting only traditional services, according to Everest.
“New GIC setups, which reached an all-time high in Q4 2017, declined slightly, but GIC expansions are at a seven-year high,” said H. Karthik, Partner at Everest Group.
Cloud, automation and analytics lead in digital-focused outsourcing deals, which dominate outsourcing activity with a 65 percent share.
North America witnessed a significant increase in outsourcing transaction activity in Q1 2018 as compared to 4Q 2017, with 115 deals recorded as compared to 103, respectively, according to Everest Group. This increase can be attributed to an improved business sentiment in the U.S. as well as an increase in outsourcing demand across healthcare and manufacturing verticals.
For the first time, the number of new centers supporting digital skills surpassed new centers supporting only traditional services. Among global services transactions overall, digital services continued to dominate the outsourcing activity in Q1, similar to the previous quarter. The share of digital-focused transactions increased from 61 percent in Q4 2017 to 65 percent in Q1 2018 vis-à-vis the pure traditional services, which showed a decline in adoption over the past quarter.
Among all outsourcing transactions, 50 percent included cloud, 21 percent included automation, 14 percent included analytics, 13 percent included mobility, 7 percent included cyber-security and 30 percent included some other form of digital service, such as social media, Internet of Things (IoT) or blockchain.
Other key global services market trends noted for the quarter include the following:
These findings and more are discussed in Everest Group’s recently released report, released Market Vista™: Q2 2018. The report discusses outsourcing transaction trends, GIC-related developments, global offshoring dynamics, location risks and opportunities, and key service provider developments.
“Outsourcing activity remained steady in Q1 as compared to the previous quarter, with a growth in information technology outsourcing as well as increases in several verticals, including retail and consumer product goods, technology and communication, and healthcare,” said H. Karthik, partner at Everest Group. “New GIC setups, which reached an all-time high in Q4 2017, declined slightly, but GIC expansions are at a seven-year high. All-in-all, Q1 was a good quarter for service providers—both global as well as offshore-heritage service providers—with most reporting sequential growth in revenue and an increase in operating margins.”
Complimentary Webinar Offers Q1 Review Plus Bonus Topic—“War for Talent: Impact on Talent Acquisition Strategies”
Everest Group hosted a webinar on May 22—Webinar Deck: Q2 2018 Market Vista™ Update and Implications on Talent Acquisition with Intensifying War on Talent—in which the findings of the “Market Vista: Q2 2018” report were reviewed. During this 45-minute webinar, Everest Group experts discussed the most impactful events in the global services industry thus far in 2018 and looked ahead to how these events likely will shape the rest of the year.
The webinar also addressed talent acquisition strategies, including the factors impacting talent models and the resulting implications and imperatives for employers. The impact of automation on transactional jobs and the redesign of the employee value proposition to reach a predominantly millennial workforce are two of the key topics covered in the discussion.
*** Watch the Webinar Replay *** (The webinar slide deck also is available for complimentary download with registration.)
Everest Group predicts enterprises will express preference for GICs and make significant shifts in their locations strategies in the year ahead.
Although 2018 will see a modest increase in demand for global services overall, some leading service providers in select segments will experience a double-digit surge in revenues this year, according to Everest Group. Labor-arbitrage focused service providers will continue to create a drag on the market; however, digital-focused service providers will more than offset that, especially in key segments such as engineering services, business process outsourcing (BPO), and consulting and systems integration.
“Throughout 2017, outsourcing transaction activity was driven by an increased adoption of digital services, and this trend will continue in 2018 as more enterprises move beyond exploration and pilot projects to large-scale digital implementations,” said Salil Dani, vice president, Global Sourcing, at Everest Group. “The industry is ready to act: enterprises have undertaken copious research and testing, service providers have invested in acquiring the digital capabilities needed, and the market is being lifted by availability of funding, cheap capital, tax cuts in the United States, and low interest rates.”
Global In-house Center (GIC) setup activity was at an all-time high in 2017, and Everest Group predicts that the Do-It-Yourself, in-house model will become even more popular in 2018, with small and mid-sized enterprises driving Global In-house Center (GIC) setup activity.
Moreover, large enterprise outsourcing adopters will begin to undertake significant, long-term shifts in their location strategies, including the following:
These findings and more are discussed in Everest Group’s recently published report, “Market Vista™: 2017 Year in Review and Outlook for 2018.” This annual report covers the key forces and metrics defining the global sourcing market, including trends in outsourcing, digital adoption, and Global In-house Centers (GICs), as well as insights into location activity in offshore and nearshore geographies. The report also reviews 25 leading service providers on their annual performance, capability enhancements, merger and acquisition landscape, and other key events.
Adoption of digital services is crossing the line from pilots to large-scale programs; will require knowing how to build portfolios of the future, according to Everest Group
Everest Group’s predictions that 2017 would see continued market slowdown and technology-led disruption in sourcing were right on the money. Growth of outsourcing services slowed in 2017 and, for the first time ever, digital-focused outsourcing deals surpassed traditional transactions in Q4 2017.
Other key market trends witnessed in 2017 include:
So, what does 2018 hold for the sourcing industry?
On Thursday, February 15, at 9 a.m. CST, Everest Group experts, including CEO Peter Bendor-Samuel, Salil Dani, H. Karthik, Michel Janssen, and Eric Simonson, will host a complimentary webinar to review 2017’s industry shifts and share their predictions for 2018.
The webinar—“Q1 2018 Market Vista™ Briefing: 2017 in Review & 2018 Predictions”—will cover the key forces and metrics defining the market, including trends in outsourcing, digital adoption, and the Global In-house Center (GIC) market, as well as insights into location activity in offshore and nearshore geographies.
Research analysts will also provide findings from the Market Vista™ quarterly report series. The most recent report, Market Vista: Select Findings Q1 2018, was released yesterday and covers key developments in Q4 2017, such as:
“As reflect throughout 2017, outsourcing transaction activity in Q4 was driven by an increased adoption of digital services, and we are certain the trend will continue in 2018 as more enterprises move beyond pilot projects to large digital programs,” said Michel Janssen, chief research guru at Everest Group. “This continuing trend will have implications for all stakeholders – and will only be buoyed by positive economic factors and other geopolitical dynamics at play.”
***Download a complimentary abstract of “Market Vista: Select Findings Q1 2018” here.***
About Market Vista™
Market Vista —a subscription-based service of Everest Group—provides the research, analysis and insights that enable Global Sourcing professionals to navigate the complexity of today’s sourcing market and make informed and impactful decisions. Market Vista research includes developments related to service providers, locations, processes and sourcing models, as well as a comprehensive outlook of the fast-evolving global offshoring and outsourcing market.
As expected, healthcare and IT outsourcing deals fall, service provider operating margins decline
Latin America was one of the bright spots in the global services industry in Q3 2017, with location activity at an all-time high, driven by a large number of new center setups in Mexico, Colombia and Costa Rica, according to Everest Group. Overall, location activity in offshore and nearshore locations marginally decreased in Q3 (350 transactions) compared to Q2 2017 (374 transactions).
Everest Group discusses these and other third-quarter developments in the sourcing industry in its recently released Market Vista™: Q3 2017 report.
*** Webinar Playback ***
Everest Group held a webinar on November 14 in which the findings of the “Market Vista: Q3 2017” report were reviewed. The webinar also featured a discussion about the attractiveness and risks of Latin American service delivery. To listen to a playback of “Practical Insights: Tips for Managing and Optimizing Service Delivery in Latin America PLUS a 3rd Quarter Market Vista Update,” click here.
Additional Q3 Trends:
“The third quarter global services demand continued to remain sluggish. While on the outsourcing market, we continued to see increase in share of digital deals, number of new GIC setups marginally reduced after an all-time high in Q2 2017. What is interesting in this quarter is the resurgence of Latin America to support global services delivery to North America, with center setups at an all-time high,” said Salil Dani, vice president at Everest Group.
The Market Vista report highlights the trends in the fast-evolving global offshoring and outsourcing market, exploring the key developments across outsourcing transactions and Global In-house Centers (GICs), as well as location risks and opportunities and service provider developments.
***Download a complimentary 12-page abstract of the report findings here.*** (Registration required.)
Industrial IoT offers faster return on investment for global service providers striving to meet enterprise demand
Internet of Things (IoT) is among the top three priorities for digital transformation for enterprises across industries; however, to move forward, companies will have to overcome key challenges, among them a complex ecosystem, data privacy and security issues, critical infrastructure and platform decisions, and investment challenges, according to Everest Group.
Currently, enterprises in the manufacturing and energy & utility sectors are the leading IoT adoptors. Industrial applications of IoT (commonly referred to as IIoT) are instrumental in increasing machinery uptime, enabling end-to-end supply chain visibility, reducing energy costs and preventing infrastructure failures. Service providers, too, have a high interest in IIoT, because IIoT offers faster return on investment than consumer IoT such as wearables and smart home devices.
Everest Group describes IoT and IIoT trends and the investments that service providers are making to capitalize on this new growth opportunity in its recently released Market Vista™: Q2 2017 report.
In addition, the report discusses outsourcing transaction trends, GIC-related developments, global offshoring dynamics, location risks and opportunities, and key service provider developments.
“Although transaction activity declined slightly in Q2 compared to Q1, it was a good quarter for the sourcing industry in many other aspects,” said H. Karthik, partner at Everest Group. “GIC market activity increased; location activity in Q2 was at an all-time high, with Europe, in particular, witnessing significant growth in activity compared to Q1; and most service providers reported sequential growth in revenues.”
*** Download Presentation Slides ***
Everest Group held a webinar on August 17 in which the findings of the “Market Vista: Q2 2017” report were reviewed. During this one-hour webinar, Everest Group experts discussed the factors disrupting the sourcing market—including digital technologies, regulatory changes and geo-political dynamics—and shared how multiple startups have emerged to fill the innovation gaps with new solutions and platforms. A particular focus of the webinar was the increasing adoption of U.S. domestic sourcing. Everest Group experts described the drivers behind increasing adoption and the experiences of firms in managing their domestic sourcing strategies.
Key Market Trends in Q2 2017
***A complimentary 4-page preview of the report is available for download here.*** (Registration required.)