ITMS and BPO Contract Analysis—Q1 2020

WHAT THIS MARKET ANALYSIS REPORT COVERS

This quarterly analysis report provides a detailed study of information technology management services (ITMS) and business process outsourcing (BPO) contracts signed since Jan 2017, including estimated total contract value (TCV) and annual contract value (ACV), which sectors consume most of these services, ITMS-BPO service breakups, service providers’ performance in these markets, and digital services by type.

WHAT YOU’LL KNOW AFTER READING

Readers will gain insight into:

• ITMS Contracts Analysis by Region

• ITMS Contracts Analysis by Service Type

• ITMS Contracts Analysis by Key Verticals

• ITMS Contracts Analysis by Main Vendors

• BPO Contracts Analysis by Region

KEY MARKET DYNAMICS

Plummeting outsourcing contract values: In Q1 2020, the number of contracts increased by 14% YoY and decreased 2% QoQ. The total contract value (TCV) and annual contract value (ACV) in Q1 2020 decreased by 35% and 33% respectively over Q4 2019; similarly, TCV decreased YoY by 10%. On the other hand, ACV grew by 4%. ITMS-BPO contracts grew consistently in Q2 and Q3 2019; in fact, there was a surge in the value of the contracts signed in Q3 2019.

Declining IT services contract values: ITMS contract values for Q1 2020 decreased by 31% over the previous quarter, and 3% YoY. Uncertainty over US politics and Brexit continued, and Q4 2019 was a slow quarter because of holidays. In Q1 2020, the COVID-19 crisis added to the slow down; however, providers still signed a decent number of IT deals. The full impact of COVID-19 will be more visible in Q2 2020 data. The public sector is ahead in the game in IT services, with 40% of the share: Despite political instability in Europe (Brexit), the US-China trade war, and the initial wave of COVID-19, for the IT services market in Q1 2020, the number of public sector contracts continued to lead the pack with 40% of the share. However, TCV decreased by 36% in Q1 2020 compared to the last quarter. The BFS (9% share) and healthcare (7% share) sectors stood out as the second and third contributors in this space.

The public sector remained a significant target market for outsourcing in both the ITMS and BPO service spaces; even after excluding indefinite-delivery/indefinite-quantity (IDIQ) contracts from the analysis, it remained the largest.

US holds the lion’s share of ITMS contracts: US ITMS contract values declined by 14% QoQ. However, it grew by 62% YoY. In Q2 and Q3 2019, the US market started to recover from its sluggish performance in the previous quarters, and in Q3 2019 it bounced back with 115% growth. But in Q4 2019, it again declined (31%), and in Q1 2020 declined further by 14% QoQ. The trend remained the same in the APAC region, which fell in value by 56% in the latest quarter. In BPO services in Q1 2020, the US and EMEA region market declined by 85% and 17% QoQ respectively.

Five-year tenure contracts continue to be the most frequently signed contracts in both ITMS and BPO services; the trend remained similar in Q1 2020. The five-year tenure IT contract value grew by 26% YoY. We saw a continuous surge in longer-than-five-year contracts in the previous quarters (Q3 and Q4 2019), but the TCV declined by 17% in the latest quarter, mainly because of the current crisis.

WHO SHOULD READ THIS REPORT

Executive leaders and business unit leaders, technology leaders, advisors and outsourcing managers in the ITMS and BPO industry.

SERVICE PROVIDERS, WE DISCUSSED

Accenture, Atos, HCL, IBM, SAIC, TCS, and Wipro.