Significant Outsourcing Demand Growth According to Everest Group Report on Top Q3 Trends in Global Sourcing | Press Release

By | Press Releases

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:

  • North America reported a significant increase in transaction activity, especially in the retail and consumer packaged goods segment and the technology and communication vertical.
  • GIC activity continues to be driven by existing adopters, with focus on establishing R&D centers for next-generation technologies.
  • While there was a decline in activity for Europe, emerging locations such as Bulgaria and Czech Republic witnessed an increase in activity given high-skilled IT talent, favorable business environment, and excellent R&D and digital infrastructure.

***Download a complimentary 16-page abstract of the report findings here.*** (Registration required.)

5 Types of Outsourcing Providers — and How to Get the Most from Them | In the News

By | In The News

As corporate technology leaders pursue their digital transformation strategies, many are looking to IT service providers as potential partners in those change efforts. However, a one-size-fits-all approach to outsourcing providers is not likely to serve CIOs well in meeting innovation goals. In fact, bigger doesn’t necessarily mean better in the digital change era.

“Traditionally, size was a good proxy for capability, especially when technology was viewed fundamentally as an enabler of efficiency,” says Jimit Arora, partner in Everest Group’s IT Services practice.

Read more in CIO

SIG Global Executive Summit 2018 — October 15-18 | Event

By | Events

Chief Research Guru Michel Janssen will be speaking at the 2018 SIG Global Executive Summit held in Rancho Mirage, California on October 15-18. On October 17, Michel will host a session titled “The Robots are Coming: Sourcing Implications on Pricing, Contracting, and the Future.” Other leaders from Everest Group will be attending the event as well.

Research VP Shirley Hung will participate in a panel discussion at the event as well. The topic of the October 17 discussion is “CSR, Sustainability, and Impact Sourcing: Perspectives and Best Practices”

About the session

Robotic Process Automation – RPA – is impacting the very way companies do business. In this fast-paced, dynamic market, it’s essential that you stay abreast of the latest market and vendor developments to best harness the power of RPA – at the right cost and with suitable contract terms. And, with everyone touting their “latest thing,” one must be able to separate the hype from the truth.

Learning Objectives

  • Considerations for vetting the underlying RPA software vendors based upon late-breaking market developments
  • The impact of the convergence of RPA and AI (and other key automation tools)
  • Key contract pricing metrics so you are prepared for deal negotiations
  • Managing the implications on your existing outsourcing relationships

About the event

SIG Global Executive Summits are 4-day events that are packed with the latest best practices, cost-cutting strategies, innovative processes and risk-mitigation approaches. Through CPO roundtables, keynote sessions, workshops, breakout sessions and networking events, you’ll hear from industry thought leaders, discover the latest innovative trends and have the opportunity to network with like-minded professionals facing similar challenges.


October 15-18, 2018


Rancho Mirage, California
Omni Ranch Las Palmas Resort & Spa


Michel Janssen, Chief Research Guru, Everest Group

Shirley Hung, Vice President, Research

Learn more and register to attend

7 Keys to Transformational Outsourcing Success | In the News

By | In The News

With digital transformation all but mandatory across industries today, that innovation imperative is impacting every part of IT, including its outsourcing engagements. However, many CIOs are struggling to integrate third-party IT services deals into their long-term business strategies. Indeed, a recent Everest Group survey found that 61 percent of enterprises pursuing digital transformation were dissatisfied with their service providers.

More than a quarter of revenues for the top 20 outsourcing providers are generated by digital services, according to Jimit Arora, partner in Everest Group’s IT Services practice, with those markets growing as the traditional services market is shrinking.

Read more in CIO

Redesigning Your Outsourcing Portfolio for a Digital World | Virtual Roundtable

By | Webinars

Thursday, June 28, 2018 | 11:00 a.m.  – 12:30 p.m. ET

Request to attend the Virtual Roundtable

As digital services cause yet another inflection in the outsourcing market, the service provider landscape is undergoing significant changes. Against this backdrop, enterprises need to recalibrate and reimagine their outsourcing portfolios to capture transformational value and manage risks.

To help organizations future-proof their outsourcing service provider portfolios, this session will provide an alternative view to segment the landscape. Participants will exchange perspectives on how they are shaping their outsourcing supply strategies to align with new demand strategies.

Who should attend

Strategic sourcing and vendor management executives who currently manage their enterprise’s portfolio of IT Services providers.

What you will learn

The session will help participants understand contemporary practices for structuring outsourcing portfolios and share best practices for future-proofing outsourcing relationships.


Jimit Arora, Partner, Everest Group
Eric Simonson, Research Managing Partner, Everest Group

Request to attend the Virtual Roundtable

11 keys to a successful outsourcing relationship | In the News

By | In The News

When it comes ensuring a successful IT outsourcing outcome, the customer has more impact than you might think. In fact, recent research conducted by outsourcing consultancy ISG found that outsourcer and client are equally responsible for outsourcing results — regardless of whether the relationship succeeded or faltered.

“In our experience, there is good intent at the beginning of the program, but, clearly, as people get back to their day jobs, focus goes back to metrics, KPIs, and quarterly business reviews,” says Jimit Arora, partner in the IT services group at outsourcing consultancy and research firm Everest Group.

Read more in CIO (registration required)

Enterprise IT Services Sourcing

By | Uncategorized

Reimagining Enterprise IT Services Sourcing

dark green box

Driving Business Value in the Digital Age

With the digitization wave disrupting and redefining today’s businesses, the role of enterprise IT, and consequently that of the IT Strategic Outsourcing and Vendor Management (SO&VM) function has become more critical than ever before.

As enterprises ramp up their digital transformation initiatives, the IT SO&VM function faces the onerous task of establishing and orchestrating an IT services vendor portfolio that can help the enterprise navigate the proverbial IT maze and fulfill strategic business objectives.

However, this is clearly easier said than done from an strategic outsourcing & vendor management function standpoint. Current enterprise satisfaction with their incumbent IT service providers stands at an all time low – 54% of all enterprise discussions conducted by Everest Group over 2017 (with companies nominated as reference clients by service providers across multiple PEAK Matrix™ evaluations of Everest Group) expressed dissatisfaction with IT service providers.

A careful examination reveals that a large part of the enterprise dissatisfaction with providers is associated with a perceived lack of innovation and business value within the IT services engagements. While enterprises point out that service providers are largely at fault for this phenomenon, Everest Group’s research suggests that the fundamental challenge lies in the sourcing model and associated practices itself.

The current IT services sourcing model is designed with scale and cost effectiveness as the primary objective function and vendor selection/categorization premise. However, new age IT services delivery requires service providers to be properly incentivized, and equipped with sufficient enterprise context in order to drive business value from IT.

Evidently, IT SO&VM functions need to fundamentally reimagine the way the sourcing model is designed, and redefine how vendor rationalization, selection, and management processes are conducted, including:

  • Imperatives for enterprise IT in today’s digital world
  • Limitations of the current IT services sourcing model
  • Introduction to a reimagined IT services sourcing framework to drive business value
  • A beginners guide for adopting the reimagined sourcing framework
  • Broad recommendations around dealing with the evolving IT services sourcing landscape.

Enterprise IT is at an inflection point

Everest Group take:

In today’s digital world, the value of enterprise IT is being defined by its ability to accelerate time to market, foster business innovation, and help drive competitive advantage.
In parallel, the quest for ongoing services cost reduction and resilience is pivoting to
a “technology-first, automation-led” modernization approach, given the maturation of arbitrage-led models. It is imperative that enterprises strike an optimal balance between their business transformation and IT modernization initiatives to maximize business value from IT.

Business value as the evolving IT objective function

The role of enterprise IT is undergoing a sea change, with businesses across the board being disrupted and redefined by the rapid digitization wave. IT has now evolved from being a mere cost center to a critical business enabler – in fact, about 60% of enterprises have prioritized IT services agility and flexibility through digital transformation as the PRIMARY focus of their IT services strategy, with cost reduction seen as a logical/implicit derivative.

Exploring the enterprise IT dualism

The digital paradigm has given rise to two distinct sets of enterprise initiatives – IT modernization and business transformation. IT modernization at its core, is focused on making IT leaner, more cost effective, and align better within business requirements. On the other hand, business transformation initiatives are designed with the desired business impact as the starting point, with a view around how “fast” business outcomes/results can be achieved (with cost not necessarily being a key consideration).

The Dualism in Enterprise IT
chart with two columns and text regarding IT modernization and business transformation

Diminishing returns from current IT services sourcing models

Everest Group take:

IT service providers stand to play a key role in helping enterprises navigate the myriad of complexities arising from next generation technology adoption. However, current enterprise satisfaction levels with IT service providers are at an all-time low. Many enterprises believe that IT service providers simply lack the strategic focus and innovation mindset to drive business value within engagements.

However, enterprises are equally at fault – current enterprise IT service sourcing strategies and constructs being followed by SS&VM functions are still anchored to traditional, cost-centric frameworks, leaving limited room and incentives for service providers to think out-of-the-box and drive innovation on a consistent basis.

Conflated approaches for IT modernization vs. digital transformation

While both IT modernization and business transformation are geared towards driving business value, the initiatives fundamentally warrant different approaches and evaluation metrics. While cost reduction and resilience are critical considerations within IT modernization initiatives, digital transformation is designed with the premise that business results and speed-to-market are of paramount importance.

Measuring Success within IT Modernization vs. Digital Transformation
two-column chart with text and graphics

In IT modernization, activities include formulating a legacy automation and cloud strategy and moving into a hybrid environment. Examples of focus areas include how to engineer that IT to be more cost-effective, which workloads should be moved out of legacy into the cloud, and which workloads should be developed in the cloud versus the legacy environment, and what workloads should be automated.

On the other hand, activities in a business transformation initiative focus on rethinking all service model components. These include, for instance, technology and architecture, development process and methodology as well as the talent model of using a persistent team collocated with the business.

Rampant enterprise dissatisfaction within sourcing engagements

As the IT environment gets more complex against the backdrop of a rapidly-proliferating technology landscape, enterprises continue to turn to service providers to navigate the proverbial IT maze. In fact, a healthy 42% of enterprises plan to increase their proportion of spend with IT service providers from existing levels over the next 12 to 24 months.1

That said, these planned spend commitments with IT service providers do not necessarily imply enterprise satisfaction within existing sourcing arrangements. In fact, anti-incumbency sentiments are at an all-time high within IT services engagements.

In 2017, 54% of all enterprise discussions expressed dissatisfaction with IT service providers compared to 48% in 2016

Enterprise Feedback – IT Services Engagements
Chart with circular satisfaction graphics and text

The expectation mismatch between enterprises and their IT service providers is evident from the fact that every one in two enterprises is currently dissatisfied with in its ongoing IT services sourcing engagement. This dissatisfaction is even more profound when a “digital” lens is applied to the sourcing scope and construct.

Enterprise Perception of Service Provider Capabilities
chart of enterprise perception of service providers along 6 dimensions
Limitations of the current IT services sourcing design

Contrary to enterprise perception, a meaningful proportion of dissatisfaction arising within IT services engagements is attributable to existing gaps in the sourcing model design itself, as opposed to solely being a function of service provider capabilities and performance.

The current model of vendor selection and sourcing for IT services largely follows a traditional three-tier model comprising strategic, Tier-2, and staffing/1099 vendors. The key challenge with this vendor sourcing model is that it has been designed for driving a scale-driven, arbitrage-led IT services strategy, rather than being anchored to a well-formulated strategic intent that is geared towards creating business value on a continual basis.

Traditional IT Services Sourcing Model for a Global Enterprise
3-tier pyramid chart with text

One of the underlying drivers for the decreasing relevance of the traditional sourcing model is the impact of enterprise digitalization on the IT+Ops organization and consumption. IT modernization initiatives require service providers to possess sufficient context around how the end-to-end IT stack is architected in order to build a transformation roadmap that not only drives cost savings, but offers the desired level of performance and resilience.

The shortcomings of the traditional IT services sourcing model become even more glaring when applied to a digital transformation context, wherein service providers are expected to leverage and orchestrate emerging technologies, offering on-demand, elastic, and
plug-and play access to ecosystems. This requires a corresponding change in sourcing models to help drive shorter, quicker, and business-focused outcomes at scale, while ensuring that providers have adequate investment and skin in the game.

Introducing SLOTS – the reimagined IT services sourcing model

Everest Group take:

The “Specialist, Legacy Aggregator, Orchestrator, Transformation Partner, Staffing” (SLOTS) framework represents the reimagined IT service sourcing model for the digital age. The framework establishes five distinct IT service provider roles to help enterprises balance multi-fold objectives of provider competition, risk management, and capabilities across change, manage, and run initiatives. Each type of service provider in the revamped IT operating model will be expected to provide unique value-addition against the backdrop
of the increasingly contingent labor ecosystem and the proliferating technology landscape.

The SLOTS framework – explained

The SLOTS framework is aimed at pivoting the IT services sourcing portfolio design and selection to a “value-driven” provider model, from the classical “scale-driven” vendor categorization followed within traditional sourcing practices.

The underlying principle of the SLOTS framework is that deriving business value from IT requires enterprises to have access to best-of-breed capabilities across a broad set of themes such as legacy IT estate optimization, next generation technology implementation, domain-centric business transformation, multi-vendor orchestration, and niche/specialized functions (e.g., design, data).

The SLOTS Framework for IT Services Sourcing
chart with current pyramid and future circular sourcing frameworks

Each provider category within the SLOTS framework is expected to bring in a unique set of value addition elements that help enterprises deal with the complexities arising from contingent labor ecosystems and rapid technology proliferation.

Description of the SLOTS Provider Categories
chart with what each letter in SLOTS means

Barring multiple domain-centric / functional specialists, an ideal and balanced enterprise IT services sourcing model will include an optimal number (one to two) of providers identified to play each of the roles in the SLOTS framework (thereby avoiding provider sprawl, mitigating governance complexities, and driving high accountability).

Furthermore, as enterprises progressively traverse the journey towards IT modernization, the role of legacy orchestrators is gradually expected to metamorphize into that of orchestrators providing ongoing governance and driving continuous improvement.

Shifting to SLOTS – a beginner’s handbook

While the exact sourcing strategy is expected to vary based on enterprise starting points (scale, maturity, existing provider portfolio, etc.), there are some guidelines and best practices for enterprises to consider while shifting to the SLOTS framework:

  1. Establish a comprehensive strategic intent: Lay out business goals over a three to five year timeframe and develop a robust IT charter by involving CXOs and other relevant stakeholders across key functions (IT functions, business lines, marketing, HR, etc.)
  2. Clearly define sourcing requirements and desired outcomes: Translate stated business objectives into well-defined IT initiatives and milestones. Delineate IT modernization vs. digital transformation initiatives – formulate desired outcomes and allocate budgets
  3. Design robust evaluation processes and engagement models: Identify and segregate scope of work to be awarded to various provider categories as per the SLOTS framework. Run a thorough evaluation considering the unique decision making criteria applicable to each provider category
  4. Drive continuous review and management: Given that both business models and technology landscapes are witnessing ongoing disruption, the IT strategy and sourcing models should also remain fluid and undergo regular reviews for course correction and ongoing alignment with business goals
Applying the SLOTS Framework for IT Services Sourcing
chart describing how to apply SLOTS framework to evaluating and engaging IT service providers

Preparing for the winds of change in the IT service provider landscape

The IT services outsourcing market is an inflection point – while the “traditional” IT services industry (accounting for about three-fourths of the market) is shrinking, demand for “digital” services (accounting for remaining one-fourth of the market) is ramping. In a hyper-competitive market, only those service providers who can rapidly rotate and align their portfolios with the digital-first world will survive.

Inflection Point in the IT Services Supply Market
stair-step chart reflecting inflection point in IT services supply

The evolving IT services landscape throws out some key implications/considerations for enterprise IT strategic outsourcing & vendor management function:

  • Carefully segregate and evaluate IT service providers based on their value proposition and capabilities for various roles from within the SLOTS framework (i.e., Specialist, Legacy Aggregator, Orchestrator, Transformation Partner, Staffing Vendor)
  • Brace for ongoing consolidation in the IT services provider market; strengthen provider risk management and governance practices
  • Benchmark and calibrate service provider solutioning approaches and offerings against industry best practices and benchmarks in order to effectively drive the innovation agenda within, and derive maximum “business value” from sourcing engagements
  • Track the innovation roadmap and investment strategy of providers in building/aligning their services portfolios in line with the digital transformation mandate

Improved Business Sentiment Drives 11% Jump in US Outsourcing Deals in Q1, According to Everest Group Findings | Press Release

By | Press Releases

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:

  • Global in-house center (GIC) expansions are at a seven-year high, as mature GICs added next-generation technologies (especially big data analytics, cloud and IoT capabilities) in their service delivery.
  • The industry saw a secular increase in the number of new centers supporting R&D/engineering services, driven by the need for innovation and customer-centricity.
  • Service providers are actively looking for partnerships with startups (as opposed to acquisitions) to leverage them for niche capabilities.

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.)

11 outsourcing myths debunked | In the News

By | In The News

Even as CIOs enter their third generation of IT services deals, misconceptions persist about the practice of IT outsourcing. Worse, new illusions have begun to emerge as outsourcing approaches have evolved. Achieving desired outcomes when working with third-party providers depends on clear-eyed understanding of what’s possible and what’s not, what responsibilities remain with the buyer and what new capabilities are required, what’s changed about outsourcing models and what remains the same.

CIO.com talked to IT outsourcing experts who work with IT buyers and vendors to help bust some of the most common myths around outsourcing today — and to aid IT leaders in setting up their outsourcing engagements for success.

Myth: The old ways still rule

Third-generation outsourcers may think they know everything there is to know about structuring engagements for success, but the reality is that the fundamentals of value creation from outsourcing have changed significantly. Consumption-based pricing is replacing fixed-price models. Contracts designed for efficiency and cost reduction have given way to deals aligned to business outcomes and growth.

“The fundamental mindset needed to succeed is very different, and a contract written for efficiency does not align with a contract that needs to drive growth,” says Jimit Arora, partner in Everest Group’s IT services research practice.

Read more in CIO

IAOP’s Outsourcing World Summit® 2018 — February 18-21 | Event

By | Events

Everest Group is once again exhibiting at The IAOP Outsourcing World Summit 2018, IAOP’s annual global gathering. The event is taking place at the Renaissance Orlando in Orlando, Florida, February 18-21, 2018.

Chief Research Guru Michel Janssen will lead an Educational Partner session titled Achieving the Best-of-the-Best RPA Results: Learn What It Takes. The session will be held on Tuesday, February 20 from 4:00 p.m. – 4:45 p.m. Michel will also be joined by Peter Quinn, Former Managing Director of Automation for SEI Investments, who will share his success stories and lessons learned with RPA.

About the presentation: Human nature makes us want to know what the best are thinking about doing. However, while interesting, these findings do little to help move our own organizations forward in the use of RPA. In this session, you’ll get an exclusive preview of just released Everest Group research that details the capabilities the most successful organizations – Pinnacle Enterprises™ – have leveraged and the RPA journey they have taken to realized superior business outcomes. This analysis is based on research that directly compares and correlates business outcomes with the capabilities required to achieve those results. You’ll walk away armed with the comparative information you need to start designing a roadmap to be competitive today – and in the future.

Also at OWS18, Eric Simonson, Managing Partner, Everest Group, will present an overview of the outsourcing industry, setting the stage for the Voice of the Customer session on the morning of Monday, February 19.

In addition, Partner Cecilia Edwards will participate in the breakfast panel discussion on Tuesday, Februarty 20 titled Strong Teams and Alliances Make Strong Organizations. The session is designed help attendees understand how to best support each other in the workplace, get the work done, and maintain a culture of safety and support for every employee. Attendees will leave with ideas for how to check themselves, be a voice for others, and strengthen teams through clear communication.

Additionally, Cecilia will participate on the panel Diversity is Great, Inclusion is Greater #weinclude on Tuesday evening. The session will discuss and define the concepts of diversty and inclusion separately and why the combination of both will create an enviable culture.

If you’re attending IAOP OWS18, plan to stop by booth #58, to talk with our analysts, consultants, and executives. We’ll also have a professional photographer at our booth who will take complimentary headshots for anyone who would like an updated corporate or LinkedIn photo.

To set up a meeting  with  us before, during, or after the conference, please contact Research  Senior Vice President, Alan Wolfe.

Read more about IAOP OWS 18