Global Outsourcing Industry Slowly Recovering in Third Quarter

Morgan Lewis - Tech & Sourcing
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Morgan Lewis - Tech & SourcingInformation Services Group (ISG) reported that the global outsourcing industry is slowly recovering from the industry’s dip in performance during the second quarter of 2020 due to the coronavirus (COVID-19). Data measuring commercial outsourcing contracts with annual contract values (ACV) of $5 million or more show that third-quarter ACV for the global market rose 3% to $14.6 billion.

Although ACV for managed services is down 5% versus 2019, third-quarter managed services ACV was up 10% over the second quarter, to $6.6 billion. This increase was driven by megadeals (those exceeding $100 million annually), contract restructurings, and strong showings in the banking industry. The ACV of cloud-based services advanced 10.5% over 2019, to $8.0 billion, due to strong demand for infrastructure as a service (IaaS) as businesses accelerate their digital transformations and shift more work to the cloud in response to COVID-19.

Despite the slowdown in the second quarter, for the first nine months of 2020, the global combined market generated ACV of $43.9 billion, up more than 4% versus 2019. The biggest increase came from IaaS, up nearly 20%, to $17.8 billon. Along with software as a service (SaaS), up 3%, to $6.6 billion, total as-a-service ACV through the first three quarters of 2020 was $24.4 billion, up nearly 15%.

ISG predicts that IaaS will continue to drive recovery, as increased use of videoconferencing and remote learning due to COVID-19 will likely continue. “COVID-19 remains an ongoing concern, but enterprises have shifted to virtual models that have pushed the acceleration of digital transformation,” said Steve Hall, president of ISG. “We are not seeing a V-shaped recovery, but transaction volume is robust even as some clients continue to delay decisions and sales cycles are lengthened.”

View the 3Q 2020 Global ISG Outsourcing Index >

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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