ISG Outsourcing Index®: Asia Pacific Posts Weak 1Q, with Contract Value and Volume Both Down Double Digits
Contract numbers sink to a four-year low for the region
ITO contracting slump continues
BPO ACV boosted by large-deal activity
BANGALORE, India, May 16, 2016 /PRNewswire/ -- The Asia Pacific outsourcing market had a weak first quarter of 2016, with both contract value and volume down by double digits, according to the latest data from Information Services Group (ISG) (NASDAQ:III), a leading technology insights, market intelligence and advisory services company.
The Asia Pacific ISG Outsourcing Index®, which measures commercial outsourcing contracts with an annual contract value (ACV) of US$5 million or more, revealed that first-quarter ACV in the region reached US$500 million, down 13 percent from the prior year. The number of contract awards in the quarter fell sharply, down 23 percent, to its lowest level since the fourth quarter of 2011. This is in sharp contrast to market performance in the Americas and EMEA regions, each of which posted strong year-on-year ACV gains.
Despite the quarterly slump, the outsourcing market in Asia Pacific has remained steady. For the fifth consecutive quarter, ACV has remained within a tight band of US$500 million-US$600 million.
Both new scope and restructured contract values edged down for the quarter, but information technology outsourcing (ITO) ACV plunged more than 50 percent, recording its worst first-quarter performance in nearly a decade. Business process outsourcing (BPO), on the other hand, logged its best ACV quarter since the third quarter of 2012, but the boost came from a large, 10-year contract in Australia between Rio Tinto and Sodexho for facilities management.
Among sub-regions, Australia-New Zealand, fueled in large part by the Rio Tinto mega-deal, recorded triple-digit growth in both value and volume over a weak prior-year quarter. India, meanwhile, had its weakest ACV showing in almost 10 years, while Southeast Asia recorded triple-digit ACV growth on the back of the five-year IBM-Indosat Ooredoo deal.
By sector, Manufacturing was the only industry to show strength among the region's major industries, boosted by some large awards and healthy contracting activity. Meanwhile the region's other powerhouse sectors, financial services and telecom, slumped significantly over last year's first quarter.
"The Asia Pacific market, although weak compared with other regions, has retained its remarkable consistency in the first quarter, despite the sharp decline in contract numbers," said John Keppel, president, ISG EMEA and Asia. "The large deals that have characterized the regional market in the past have all but disappeared. To drive market growth in Asia Pacific, the industry will need to follow the global trend of stepped-up activity in the smaller-deal category."
About the ISG Outsourcing Index®
Now in its 54th consecutive quarter, the ISG Outsourcing Index® provides a quarterly review of the latest sourcing industry data and trends for clients, service providers, analysts and the media. For more than a decade, it has been the authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider performance.
To view an infographic highlighting the major findings of the 1Q 2016 Global ISG Outsourcing Index®, go to http://www.slideshare.net/ISG_Inc/1q-2016-global-isg-outsourcing-index-infographic.
About Information Services Group
Information Services Group (ISG) (NASDAQ: III) is a leading technology insights, market intelligence and advisory services company, serving more than 500 clients around the world to help them achieve operational excellence. ISG supports private and public sector organizations to transform and optimize their operational environments through research, benchmarking, consulting and managed services, with a focus on information technology, business process transformation, program management services and enterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, the deepest data source in the industry, and more than five decades of experience and global leadership in information and advisory services. Based in Stamford, Conn., the company has more than 1,000 employees and operates in 21 countries.
For additional information, visit www.isg-one.com.
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