ITMS and BPO Contract Analysis – Q4 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 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

Rising outsourcing contract numbers and values: In Q4 2020, the number of contracts increased by 17% YoY and 3% QoQ. The total contract value (TCV) and annual contract value (ACV) in Q4 2020 increased by 7% and 4%, respectively, over Q3 2020. Similarly, contract values increased YoY by 30% (TCV) and declined by 16% (ACV). As predicted, the market bounced back strongly, and mega deals returned to the industry. With new business environments, such as new leadership in the US, providers can access worldwide talent pools, increasing localization. New ways of doing business bring great opportunities to the industry. We will continue to see mega deals (such as Infosys – Daimler and Wipro – Metro AG) in the coming quarters, mainly driven by cloud, AI (artificial intelligence) and automation, and security deals.

IT services outsourcing contracts bounced back strongly: ITMS contract value for Q4 2020 increased by 25% over the previous quarter and 43% YoY. There was a surge in ADM contracts YoY (10%) but a decline QoQ (26%). Multi-ITMS contracts grew 26% QoQ and 130% YoY, mainly because enterprises re-energized their focus on new priorities in Q3 and Q4. In other words, the market is resuming its original flow. Even though in November and December many countries-imposed lockdowns on account of the second wave of COVID-19, we still witnessed strong growth in deal values and numbers.

Surge in complex IT managed services and infrastructure 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, and infrastructure contracts fell compared to previous quarters. In Q4 2020, multi-ITMS (26%) and infrastructure (17%) contracts showed solid QoQ growth. We expect the upward trend to continue, and we foresee a huge demand for ADM and digital transformation contracts in coming quarters as the new working environment continues to accelerate the transformation process.

Continuous rise in BPO contract values: In Q4 2020, BPO TCV increased by 39% compared to the previous quarter but declined by 38% YoY. Like IT services, after two consecutive quarters of declines (Q1 and Q2 2020), BPO contracts gained some traction in the last two quarters. BPO services are recovering strongly, and the market outlook is optimistic. In Q4 2020, new contracts signed plus service providers’ quarterly performance created a market uptrend; currently, BFS and public sector deals are gaining traction. We see less or no traction in other major industries like travel, telecom, insurance, energy and utilities, CPG, and retail. However, we hope to see progress in the coming months and quarters.

The cloud continued to hold more than 50% of digital contract share: The cloud remains fundamental to IT operations, and its importance steadily increased during the COVID-19 pandemic. SaaS, PaaS, and IaaS remain major elements in digital services contract volume.

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, Infosys, and Wipro.