ISG: Conditions Align for Outsourcing to Grow Significantly in Five Industries

STAMFORD, Conn., July 27, 2015 /PRNewswire/ -- Outsourcing activity is set to expand significantly in five major vertical industries – consumer durables, oil and gas operations, insurance, banking and utilities – according to an extensive market analysis released today by Information Services Group (ISG) (NASDAQ: III), a leading technology insights, market intelligence and advisory services company.

Under ISG's exclusive methodology, the five growth industries cited above were the only verticals to earn a "high" rating for both their potential for new outsourcing adoption and their potential for expanded outsourcing spending. ISG analyzes recent outsourcing adoption, spending changes by market participants, historical patterns of activity and current industry dynamics to arrive at its conclusions. Overall, ten different industries earned a high rating for new adoption potential and nine rated highly as expansion candidates, but only the five cited industries ranked highly in both categories.

The complete analysis is included in the new ISG Momentum® Market Trends & Insights® 2015 Vertical Report, which also presents exclusive data on outsourcing spending, recent contract awards, average per-company spending and the current outsourcing penetration rates for Forbes^® Global 2000 companies in 27 different vertical industries (see Figure 1 for summary data). The report, which measures outsourcing activity and spending by annual contract value (ACV) for the 12 months ended March 31, 2015, found current outsourcing penetration rates are at or near record levels for many vertical industries, however overall ACV declined by 4 percent during the period studied.

Digital disruption was a major factor in limiting overall spending. Many organizations recognize the need to build more automation and digitization into their internal and customer-facing operations and are acting on it, but many are not making long-term commitments to outsourcing agreements until they solidify their digital strategies. In addition, expansion of cloud computing, X-as-a-Service offerings and automation solutions continue to produce year-over-year price declines for many traditional outsourcing services, which further limits spending growth.

The five verticals that ranked as "high" for both outsourcing expansion and new adoption potential all exhibited strong demand for innovation and are looking to outsourcing service providers for ideas. Consumer durables, utilities and oil and gas companies have all shown strong interest in Internet of Things (IoT) and other innovations to drive down their production and distribution costs. Meanwhile banks and insurance companies are seeking innovation in mobile and online platforms for attracting and servicing customers, and in applying analytics to the data they collect.

"The drive to innovate, often by applying SMAC and other digital technologies, has produced an interesting array of projects and is leading companies to expand outsourcing, often to acquire new capabilities or to reduce time-to-market for new products and services," said Paul Reynolds, chief research officer at ISG. "Each vertical is unique in how the themes of innovation and digitization are playing out and how outsourcing is being used. Because of these developments, we found opportunity in all verticals for outsourcing to help businesses in new ways, even within industries and companies where outsourcing is quite mature."

The data presented on outsourcing spending, penetration, contract activity and service provider market share are derived from the ISG Contract Database. The data are supplemented with information gleaned from interviews with outsourcing professionals and secondary research to put the data into perspective by identifying current outsourcing drivers and obstacles that are specific to each industry.

The 2015 Momentum^® Market Trends & Insights Vertical Report is part of a series of quarterly reports that focus on outsourcing activity by service line, vertical industry and geographic location. To read the executive summary of this report or to learn about other Momentum services and information products, please visit www.isg-one.com/web/services/momentum/.

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 900 employees and operates in 21 countries.

For additional information, visit www.isg-one.com.

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SOURCE Information Services Group

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