The relentless drive to digitize and automate has 2018 on pace to be one of the strongest years ever for outsourcing contract awards, according to new market research from Information Services Group (ISG).
The 2018 ISG Momentum® Market Trends & Insights Service Line Report, which examines contracting trends in seven key service lines, found almost all business process outsourcing (BPO) and information technology outsourcing (ITO) services are benefiting from strong enterprise demand for digital transformation and automation support. Indeed, through the first half of 2018, the number of outsourcing contracts awarded for most service lines was on pace to meet or exceed 2017 totals, when the ITO segment produced its best year-over-year contract award growth rate in a decade, and the BPO segment saw the fourth-highest number of contracts awarded in a single year.
“Increasingly sophisticated enterprise attitudes about outsourcing are driving sustained growth over the last three years,” said Paul Reynolds, ISG partner and chief research officer. “There is a distinct focus on the strategic use of outsourcing to help a business run better and become future ready. Clients are contracting with technology and service providers to take advantage of their process expertise and gain access to new technologies.”
Among the services lines analyzed by ISG, perhaps none is in greater demand than application development and maintenance (ADM). Data through the first half of 2018 show ADM contract volume significantly ahead of the pace of 2017, which produced 29 percent more ADM contracts than 2016. The cumulative value of ADM-only contracts is now almost equal to that of full ITO contracts, one indicator of ADM’s market importance. Many new ADM engagements, ISG found, are related to redeveloping or migrating enterprise applications to run in hosted environments, enabling apps and services with artificial intelligence, and automating application testing and support.
ISG found that in response to market demand for innovation, providers are taking a more consultative approach to their engagements and embedding new capabilities into their offerings.
Examples include new levels of automation and predictive maintenance in data center services; new workplace services that encourage enterprise collaboration; expanded use of software-defined network (SDN), network function virtualization (NFV) and enhanced security in managed network services (MNS); and the use of blockchain in finance and accounting and other transaction-oriented services. Analytics and robotic process automation are now being included in many business process- and industry-specific service offerings.