Market Analysis


Plunging outsourcing contract numbers overall: In Q1 2019, the number of contracts decreased by 33% YoY and 14% compared to Q4 2018. The total contract value (TCV) and annual contract value (ACV) in Q1 2019 decreased by 38% and 45% respectively over Q1 2018. The number of ITMS-BPO contract announcements has continuously decreased over the last five quarters.

Stabilizing ITMS contracts: ITMS contract value for Q1 2019 increased by 4% over the previous quarter, and it declined by 31% year over year (YoY). Fewer IT contracts were signed in the Q1 2019, but a couple of major contracts for digital transformation in the banking sector did some heavy lifting in Europe and contributed to the overall contract value increase.

Growing ADM market: Besides, digital service contracts, application development, and management (ADM) services hold a major share of the ITMS contracts, followed by infrastructure services. In a recently published report, we briefly discussed the growing ADM market; ADM services registered continuous growth over the last two quarters, supporting our projection.
An uplift in BPO contracts: Although ITMS contracts hold a major share of the outsourcing market, in Q1 2019, BPO contract value (TCV) increased by 19% compared to the previous quarter. This is mainly because of a major HRO contract signed by the Australian government.
Consistent growth in cloud contracts: SaaS, PaaS, and IaaS remain major elements in digital services contract volume. In Q1 2019, cloud-related services accounted for 55% of the share, with an average of 46% share of overall digital contracts over the last four quarters. The growth 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 serverless and containers.

Five-year tenure contracts were the most frequently signed contracts in both ITMS and BPO services; the trend remained similar in Q1 2019, but the contract value declined by 41% YoY. We have seen a slight resurgence in the number of contracts longer than five years in Q1 2019 compared to previous quarters, mainly because of public sector contracts. In general, five-year deals remained the most popular across IT and BPO services.    

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