ITMS and BPO Contract Analysis—Q2 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 numbers: In Q2 2020, the number of contracts decreased by 26% and 12% YoY and QoQ, respectively. The total contract value (TCV) and annual contract value (ACV) in Q2 2020 decreased by 13% and 14% respectively over Q1 2020. Similarly, contract values are lower YoY by 31% (TCV) and 32% (ACV).

Declining IT services contract deals: ITMS contract value for Q2 2020 decreased by 10% over the previous quarter and 14% YoY. There was a surge in ADM (52%) QoQ but a decline of 25% YoY. Multi-ITMS contracts fell by 39% QoQ and grew 11% YoY, mainly because enterprises’ priorities changed in Q2 due to the impact of COVID-19. Lockdowns hugely impacted the travel, leisure, retail, and oil and gas sectors. However, in Q3 2020, many countries removed their travel and other restrictions, which is indeed optimistic.

Public sector continues to lead the pack in IT services: Despite geopolitical challenges, the number of public sector contracts continued to lead the pack with 49% of share of total TCV. The TCV increased by 7% in Q2 2020 compared to the last quarter. The remaining sectors’ TCVs, including healthcare (-79%), telecom (-51%), BFS (-24%), and travel, dropped significantly in Q2 2020 compared to the previous quarter. 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.

The US holds the lion’s share of ITMS contracts: The US market began recovering from its sluggish performance in the quarters before Q2 2019, but in Q3 2019 it bounced back with 120% growth. However, in Q4 2019 it again declined by 74% QoQ. In Q2 2020, US ITMS contract values declined by 23% QoQ and 1% YoY. As the US is the most COVID-impacted country, we expect a similar trend in Q3 as well. The trend remained the same in the APAC region, which fell in value by 8% in Q2 compared to the previous quarter. In BPO services for Q2 2020, the EMEA market declined by 30% QoQ.

Five-year tenure contracts continue to be the most frequently signed contracts in ITMS: The trend remained similar in Q2 2020, but the contract value declined by 24% YoY. Except for Q1 2020, there was continuous traction in longer-than-five-year tenured contracts in the previous quarters (Q3, Q4 2019 and Q2 2020). Even in Q2, it grew by 57% compared to the previous quarter despite the current crisis. In BPO services, there was a huge surge in three-to-four-year tenured contracts, which grew by 83% YoY.

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 DISCUSS

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