Market Analysis



  • Rising outsourcing contract numbers: In Q2 2019, the number of contracts increased by 4% YoY and 35% compared to Q1 2019. The total contract value (TCV) and annual contract value (ACV) in Q2 2019 increased by 13% and 31% respectively over Q1 2019. However, the contract values are lower YoY by 25% (TCV) and 21% (ACV) respectively. After a steady decrease of ITMS-BPO contract announcements, there was a surge in contracts signed in Q2 2019. Despite the political instability in Europe and the US-China trade war, the industry signed more contracts in Q2 2019 than Q1 2019. The trend continued with increased transformation activities within IT and changes in traditional outsourcing models to include more digital and intelligent modes of operation. Thirty-three percent (33%) of the digital others* contracts were digital transformation projects.
  • Steady growth in ITMS contracts: ITMS contract value for Q2 2019 increased by 3% over the previous quarter, and it declined by 26% YoY. Compared with previous quarterly analysis, we observed slow and steady growth QoQ and similarly slow recovery for YoY growth. The number of ITMS contracts increased by 38% compared to Q1 2019, mainly driven by public sector contracts (86%) with major activity from the US, European, and Australian governments.
  • ADM growth market continues: Application development and management (ADM) services hold the highest share (34%) of ITMS contracts, followed by digital and infrastructure services. In a recently published report, we briefly discussed the growing ADM market; ADM services registered continuous growth over the last three quarters now, supporting our projection.
  • Plunging BPO contract values: In Q2 2019, BPO TCV declined by 25% compared to the previous quarter. The main reason was that the BPO industry attained its growth plateau after years of rapid success. Unless resources with a new set of skills are brought in, we expect a similar trend in coming quarters.
  • Public sector leads the pack in Q2 2019: In spite of political instability in Europe and the US-China trade war in the IT services market, in Q2 2019, the number of public sector contracts increased by 65% compared to the previous quarter. TCV grew by 8% in Q2 2019 compared to last year. The banking sector stood out as the second contributor in this space; however, the same declined by 69% QoQ. The public sector remained a major target market for outsourcing in both the ITMS and BPO services spaces, even after excluding indefinite delivery/indefinite quantity (IDIQ) contracts from the analysis it holds most shares.
  • EMEA region continue to lead in the ITMS contracts: The trend for EMEA leading in ITMS contracts has continued for two consecutive quarters, in contrast to the usual trend of the US signing high-value ITMS contracts. In Q2 2019, EMEA signed $3 billion worth of high-valued ITMS contracts. In Q2 2019, YoY total contract value in the US and EMEA declined by 34% and 18% respectively.


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