Market Analysis


There has been a major shift in outsourcing contracts:

  • The number of ITMS-BPO contracts decreased by 6% in Q4 2018 compared to the previous quarter.
  • The total contract value (TCV) and annual contract value (ACV) in Q4 2018 have decreased by 56% and 59% respectively over Q4 2017.
  • The decline in ITMS-BPO contract value over the past four quarters is largely due to increased transformation activity within IT, changes in traditional outsourcing models to include more digital and intelligent modes of operation, volume-based pricing, a shift in the perception of traditional outsourcing’s value proposition, and new deals and renewals being signed at ever lower price points due to reduced operational costs.
  • Enterprises are focused on minimizing operational costs by spending on both cloud computing and increasing the use of AI and automation within contracts, which combined means less dependency on traditional outsourcing models.
  • Decreasing ITMS contracts: ITMS contract value for Q4 2018 has decreased by 55% over the previous quarter, and it has declined by 51% year over year (YoY). This is largely due to industry transformation in the ITMS space. This situation is only temporary; enterprises are re-platforming to newer “digital” and intelligent IT platforms. This is likely to see core IT operations outsourced along with non-core IT operations, as the wave of transformation matures.


There has been an uplift in BPO contracts:

  • Although ITMS contracts hold a major share of the outsourcing market, in 2018 BPO contracts values (TCV) increased by 51% compared to a year ago.
  • Transamerica, M&G Prudential (IT/BPO contract), and Conduent signed some of the major BPO contracts in 2018.
  • The public sector (still) leads the pack: In IT service contracts, TCV declined by 105% in Q4 2018 compared to a year ago. The public sector remained a major industry for the outsourcing market in both the ITMS and BPO services spaces, even after excluding indefinite delivery/indefinite quantity (IDIQ) contracts from the analysis.


As for the rise in cloud contracts:

  • Cloud computing continues to dominate ITSM transformation deals; on average, it contributed 43% of digital contracts over the last four quarters. This is not just driven by the adoption of cloud computing; it’s also driven by a rise in the use of the public cloud and newer variants such as server-less and containers.
  • Related services, such as managed security, are also expected to accelerate to keep pace with this adoption.


(19 Pages)

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