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 Jun 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
Outsourcing contract numbers are plunging, but the values aren’t: In Q2 2021, the number of contracts increased by 27% YoY but decreased by 19% QoQ. The total contract value (TCV) and annual contract value (ACV) in Q2 2021 increased by 14% and 5%, respectively, over Q1 2021. Similarly, YoY contract values increased by 113% (TCV) and by 86% (ACV), respectively.
As predicted, the market bounced back strong; a few mega deals returned to the industry, and the market is prioritizing the digital journey. With new business environments, providers can access worldwide talent pools, increasing localization. New ways of doing business bring great opportunities to the industry without boundaries and time zone constraints. We will continue to see mega deals (such as Leidos–NASA and Capita–major European telecom provider) in the coming quarters, too, mainly driven by cloud, AI (artificial intelligence), automation, and security deals. We’ve noticed a change in enterprises’ preferences; they are breaking large deals into smaller ones to reach two or more service providers and get the best-in-breed and outcome-focused delivery.
- IT services outsourcing contracts bounced back strong: ITMS contract value for Q2 2021 increased by 9% over the previous quarter and 99% YoY. There was a significant surge in multi-ITMS contracts YoY (327%) and QoQ (31%). ADM contracts grew 4% QoQ and 2% YoY, mainly because enterprises re-energized their focus on new priorities in the last three quarters. In other words, the market is resuming its original flow. Even though in April and May, many countries-imposed lockdowns on account of the second wave of COVID-19 (and the third wave in some countries), there was still strong growth in IT deal values and numbers.
- Surge in complex IT managed services and ADM contracts: In 2019 (Q2, Q3, and Q4 2019), we saw a surge in multi-ITMS TCV (contracts covering multiple infrastructure types). However, in Q1 and Q2 2020, the value declined but has since regained traction. In the recent quarter, ITMS contracts grew by 31% QoQ and 327% YoY. We expect the upward trend to continue, and we foresee a huge demand for multi-ITMS and ADM contracts as part of digital transformation strategies as the new working environment accelerates the transformation process.
- Strong growth momentum in BPO contract values: In Q2 2021, BPO TCV increased by 40% compared to the previous quarter and by 251% YoY. BPO services are recovering strong; there was constant and significant growth in the last four quarters, and the market outlook is optimistic. In Q2 2021, new contracts were signed, and service providers’ quarterly performances created a market upswing. Currently, telecom, public sector, and BFS deals are gaining traction. We see less or no traction in other major industries like travel, insurance, energy, and utilities. However, we hope to see progress in the coming months and quarters. As countries relax their lockdown requirements and travel restrictions, expect to see new business models and processes. The new processes help resume or increase BPO contracts in travel, hospitality, insurance, and the energy and utility industries.
- US holds a significant share of ITMS contracts: In Q2 2021, the market (TCV) grew 57% compared to the previous quarter, including APAC (160%). The market experienced double-digit YoY growth: US (165%), APAC (86%), and EMEA (46%). In BPO services for Q2 2021, the US market declined by 12% QoQ. But the EMEA regions continued to grow (95%) QoQ consistently.
Who should read this report
Executive leaders and business unit leaders, technology leaders, advisors and outsourcing managers in the ITMS and BPO industry.