Tag: Market Vista

New center setups in Latin America Reaches All-Time High in Q3—Everest Group | Press Release

November 30, 2017

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:

  • There was an increase in research and development (R&D) center setups by technology and communications enterprises, reflecting their preference to insource next-generation services.
  • Healthcare outsourcing transaction volume declined due to uncertainty around regulatory changes in the United States.
  • Revenue increased quarter-to-quarter for offshore heritage providers (3.1 percent) but decreased 0.4 percent for global providers overall.
  • Operating margins for offshore heritage providers declined due to appreciation of the Indian rupee; operation margins for most global majors declined, reflective of declining revenue.
  • After reaching an all-time high in Q2 2017 at 49 setups and expansions, Global In-house Center (GIC) activity fell in Q3 to 36 setups and expansions.
  • The share of tier-2 locations increased compared to tier-1 locations.
  • ITO deals and application outsourcing services saw a decline.
  • Among new IT outsourcing deals and GIC center setups, the share of digital services provided increased compared to traditional services provided.
  • There are significant differences in the leading digital services supported by GICs versus those supported by IT service providers. GICs more commonly provide analytics (41 percent), cloud (24 percent) and cybersecurity (20 percent) services, whereas IT service providers offer primary cloud services (58 percent), followed by analytics (13 percent).

“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.)

Enterprises Warming to IoT According to Everest Group Research | Press Release

August 21, 2017

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

  • GIC activity continues to be driven by existing adopters, with focus on establishing R&D centers for next-generation technologies.
  • Outsourcing demand from the United Kingdom continued to remain low due to uncertainty with Brexit and reduced outsourcing by cash-strapped healthcare and government sectors.
  • Reduced revenue growth is pushing service providers to form partnerships rather than invest in acquisitions.
  • Leading locations—India in Asia Pacific, Northern Ireland and Romania in nearshore Europe, and Brazil in Latin America—witnessed a spike in new delivery center setups

***A complimentary 4-page preview of the report is available for download here.*** (Registration required.)

Global Services Market Sees 3x Rise in Digital-Focused Deals at Expense of Traditional Business Process Services | Press Release

June 1, 2017

Digital services now represent up to 20% of business portfolios of leading firms.

In 2017, global services providers witnessed sluggish revenue growth in their legacy businesses, while their digital businesses grew remarkably. Digital-focused deals increased nearly threefold in 2017, with cloud application and analytics forming a major portion of digital deals. However, while there is increased focus on next-generation technologies and cloud services, deal volumes in traditional business processes and legacy infrastructure services remained stagnant for many of the leading service providers.

This trend was evident in Q1 2017 as well. Activity in the global services market witnessed a notable increase in Q1 2017 compared to Q4 2016 (383 deals to 367 deals, respectively), owing to a significant rise in ITO deals, while BPO transactions declined.

“There is increasing demand from enterprises for next-generation services given need to improve customer satisfaction and increase efficiency and effectiveness of service delivery. Service providers are accordingly making digital investments to adapt to changing market dynamics,” said Salil Dani, vice president at Everest Group. “In 2017, we witnessed 40 acquisitions to expand digital capabilities, 140 alliances between providers and technology providers or startups, and the setup of 35 new centers and digital pods to help clients rethink their digital strategies. Unfortunately, this robust activity cannibalized traditional business services investments and resulted in a deceleration of service providers’ overall revenue growth to a compound annual growth rate of between 0 and 5 percent.”

These results and other findings are explored in “Market Vista™: Q1 2017.”

Market Vista: Q1 2017 includes data, analysis and insights on transaction trends, major outsourcing deals, global in-house center market dynamics, trends in offshoring, emerging destinations and service provider development (including latest development on next-generation technologies such as digital services). The report also includes Standard Locations Database, which tracks 23 leading offshore locations.

***Download complimentary report abstract here***

Other Key Takeaways

  • While the overall outsourcing demand remained steady, there was a significant decrease in demand from the United Kingdom given the uncertainty with Brexit.
  • GIC setup activity continues to remain high, led by engineering/R&D services.
  • Delivery center setups increased in Asia Pacific relative to Nearshore Europe, reversing the previous year’s trend.
  • Service providers have acknowledged the uncertainty due to U.S. visa reforms and have increased local hiring and overall onshore leverage to safeguard their businesses, especially in IT services.
  • As the market shifts from arbitrage-first to digital-first in contract demands, leading providers are making fundamental changes to their talent and service delivery models.

Global Sourcing Activity Declines in Q3 2016, But GIC Setup Activity Marks All-Time High | Press Release

December 1, 2016

Trend to watch: Leading service providers are accelerating investments in cybersecurity as enterprise adoption of digital services continues to rise.

Location activity in the global sourcing industry declined significantly in Q3 2016 from the previous quarter, with 404 deals in Q3 compared to 429 in Q2, according to Everest Group, a consulting and research firm focused on strategic IT, business services and sourcing.

Although outsourcing activity across North America increased during the quarter (with share of transactions jumping from 31 to 37 percent), there was a 24 percent decline in the number of deals across Europe (except in the United Kingdom, which reported no change in activity), and the rest of the world experienced a decline as well.

Conversely, Global In-house Center (GIC) setup activity reached 37 setups in Q3 2016, an all-time high, led by new adopters setting up their first delivery centers. GIC activity on a year-to-year basis also witnessed increased traction, reflecting the growing importance of in-house centers to enterprises.

Key Trend to Watch

Everest Group’s Q3 2016 research suggests that a key trend to watch is increasing service provider investments in cybersecurity. Between 2015 and 2016, service providers have ramped up their cybersecurity portfolios via strategic acquisitions, organic growth and collaborative alliances with technology firms.

“As enterprises increasingly adopt digital services, robust cybersecurity programs are becoming ‘must have,’” said H. Karthik, partner at Everest Group. “This, in turn, is forcing service providers to continuously evolve their offerings and move toward end-to-end cybersecurity services.”

“Baseline cybersecurity capabilities of service providers include having personnel that can follow a client’s security initiatives and use basic security tools and products to manage the security of applications and infrastructure. But service providers are moving quickly beyond that to develop more sophisticated services, ranging from designing security architecture to providing insights through security analytics. Leading service providers are pushing the envelope even further, looking to provide even more advanced support, such as pre-emptive threat intelligence, localized managed security services and incident response.”

Market Vista™: Q3 2016 These findings and more are discussed in Everest Group’s recently published report, “Market Vista™: Q3 2016.” This report provides data and analysis highlighting the key trends and developments in the fast-evolving global offshoring and outsourcing market. The research captures the key developments across outsourcing transaction trends, the health of Global In-house Centers (GICs), location risks and opportunities, and service provider developments.

A review of the Market Vista Q3 updates is offered in a webinar: “The Impact of Philippine Political Changes on Global Services, PLUS Market Vista™ Q3 Updates.” This one-hour session hosted by Karthik and Salil Dani, vice president at Everest Group, provides the latest insights on the global services industry, including:

  • Major contributors to global services market growth in Q3 2016
  • Demand geographies contributing to market growth
  • New segments that are driving growth
  • Supply geographies best suited to support incremental demand
  • The market outlook for the remainder of 2016

In addition, the webinar features commentary and analysis on the impact of recent changes to the political climate in the Philippines.

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