Market Overview

ISG Finds Sourcing Opportunity Greatest in Germany, U.S. and U.K.


STAMFORD, Conn., Jan. 2, 2019 /PRNewswire/ -- IT modernization through cloud computing and overall digital transformation of IT systems and business processes are driving enterprise demand for outsourcing services going into 2019, according to a new market analysis from Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The annual ISG Momentum® Geography Report finds the outsourcing penetration rate among Forbes® Global 2000 companies reached a record 55 percent, up 6 percentage points from 2017, triple the typical rate of increase. "There is a tremendous amount of effort and investment underway to support digital reinvention all over the world," said ISG Partner and Chief Research Officer Paul Reynolds. "Companies are pursuing digital transformation and are investing in outsourcing to support software development, infrastructure modernization, cloud enablement and organizational change management to accomplish their digitization goals."

The countries with the highest outsourcing market opportunity based on ISG's proprietary methodology are also those with the highest outsourcing spending. Germany, the U.S. and the U.K. are the top three countries for opportunity, according to the report, with Germany displacing the U.S. for the top spot after finishing second the last two years. Canada, at number seven, is the lone newcomer to the list of the top 10 markets for opportunity, having jumped six positions in the last year on surging sourcing spending. China (12) and Hong Kong (19) also improved by six positions from the prior year, while Belgium was the biggest decliner, dropping five positions, from 19th to 24th.

While the largest 100 companies on the Forbes list have the highest outsourcing penetration, at 92 percent, the greatest growth since 2015 has come from midmarket companies ranked between 501 and 1,000. Penetration is lowest among companies ranked between 1,001 and 1,500, at 43 percent, and between 1,501 and 2,000, at 32 percent.

"Online storage, SaaS, virtual desktops and other cloud-based desktops have made it much easier for companies to outsource some of their IT functions and business processes," Reynolds said. "That's especially true for smaller companies, where outsourcing penetration has historically lagged."

With outsourcing penetration up significantly, average global annual contract value (ACV) is poised to grow in 2018 for the first time in five years, reversing a trend of single-digit annual declines (topping out at 5 percent in 2016) since 2013. Through the first nine months of 2018, every region is within 85 percent of its 2017 full-year total and, globally, ACV is shy only 9 percent from all of 2017, meaning a strong fourth quarter should push the market into positive territory.

The country ranking in outsourcing opportunity is based on the Outsourcing Viability Index (OVI) for Opportunity, a proprietary ISG methodology that ranks 28 markets on growth potential. Another methodology, the OVI for Delivery Center Maturity, ranks 22 markets on their ability to support outsourcing service delivery.

Following Germany, the U.S. and the U.K., the top 10 OVI for Opportunity markets include Japan at number four, followed by Australia, India, Canada, the Netherlands, France and Switzerland.

In the OVI for Delivery Center Maturity, India ranks first, China second and Malaysia third. Russia, the Philippines and Ireland follow. Asian countries make up six of the top 10 delivery centers.

The full report provides global, regional, sub-regional and country-level data about outsourcing spending, penetration rates and other key metrics. The report also includes in-depth profiles of nearly four dozen countries that are large markets for outsourcing services and/or leading locations for service delivery. Market data is presented in more than 400 charts, tables and other graphics and country profiles include firsthand observations about local outsourcing trends, client preferences and provider activity reported by ISG professionals working in the countries.

To view an executive summary of 2018 ISG Momentum® Market Trends & Insights Geography Report, click here.

The latest ISG Momentum® report is part of an ongoing series of market research reports that focus on outsourcing activity by service line, vertical industry and geographic location. To learn about these or other ISG Momentum® services and information products, please visit the ISG Momentum® Research page on the ISG website.

About ISG

ISG (Information Services Group) (NASDAQ:III) is a leading global technology research and advisory firm. A trusted business partner to more than 700 clients, including 75 of the top 100 enterprises in the world, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; technology strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,300 professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry's most comprehensive marketplace data. For more information, visit

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SOURCE Information Services Group, Inc.

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