The global sourcing industry posted healthy numbers for Q4 2018, marked by an 8 percent increase in outsourcing transactions and a 13 percent increase in Global In-house Center (GIC) setups and expansions over the previous quarter.
Digital services continued to dominate the outsourcing activity in Q4, with 74 percent of all outsourcing transactions comprising digital-focused services as compared to 26 percent of transactions focused on pure traditional services. Cloud services were included in 44 percent of all digital-focused transactions for the year.
- The majority (55 percent) of offshore and nearshore service delivery centers set up in Q4 were focused on digital services. Fifty-six percent of new centers established in Q4 supported automation and 33 percent included analytics services.
- GICs were increasingly leveraged for digital services in Q4, with 59 percent of GIC setups and expansions including digital services in their scope. Automation continued to account for the maximum share (63 percent) of the total digital-based GIC setups during Q4, reflecting the significant degree to which enterprises are seeking to leverage automation to improve efficiency, deliver business value and reduce cost beyond traditional means.
“The global services industry enjoyed a fourth consecutive quarter of growth in Q4 2018, with digital services activity continuing its upward trend,” said H. Karthik, partner at Everest Group.
Two key areas of service provider activity in Q4 demonstrate this strong emphasis on digital services. First, service providers such as Accenture, DXC Technology and TCS announced acquisitions of startups to enhance their interactive digital content capabilities. Secondly, several service providers announced innovative partnerships with educational institutions in their attempts to bridge the digital skills gap. For example, Accenture announced a partnership with Georgia Institute of Technology, IBM is teaming up with IIT Delhi, and Infosys is joining forces with Cornell. “We will continue to see service providers investing in acquisition and partnership strategies to strengthen their digital services capabilities in the year ahead,” said Karthik.
Everest Group discusses these and other fourth-quarter developments in its recently released Market Vista™: Q1 2019 report. The quarterly report highlights the trends in the fast-evolving global sourcing market, exploring the key developments across outsourcing transactions and Global In-house Centers (GICs), as well as location risks and opportunities, and service provider developments.
Additional highlights from the Market Vista: Q4 2018 report:
- Themes such as design, customer experience, automation and cloud were prominent in Q4 2018.
- The uptick in outsourcing activity was led by the Banking, Financial Services and Insurance (BFSI) sector.
- Q4 saw substantial growth in adoption of GICs by small enterprises, with a particular focus on specific services rather than multi-functional centers.
- The Asia Pacific region witnessed a significant rise in research and development (R&D) GIC setups by manufacturing enterprises, demonstrating a preference to insource next-generation engineering services.
- To build niche capabilities, service providers focused on the acquisition of startups as opposed to partnerships. As many as 70 percent of acquisitions in Q4 were startups compared to 50 percent in Q3.
- Key location risk/opportunity trends identified for Q4 2018 include South Africa announcing a new GBS incentive scheme to improve the country’s value proposition; Lithuania attracting a multitude of players looking to innovate and deliver FinTech services, increasing competition from service providers for engineering services sourcing, and significant investment from the Canadian government, likely to boost attractiveness of British Columbia for digital services delivery.
- Download a complimentary 16-page abstract of the report findings here.
- In the recent webinar, “The 5 Most Important Global Services Trends for 2019,” Everest Group experts shared the context for many of the highlights of the Market Vista™: Q1 2019 report as well other key market trends. Watch the replay or download the webinar deck here.
About Everest Group
Everest Group is a consulting and research firm focused on strategic IT, business services, engineering services, and sourcing. We are trusted advisors to senior executives of leading enterprises, providers, and investors. Our firm helps clients improve operational and financial performance through a hands-on process that supports them in making well-informed decisions that deliver high-impact results and achieve sustained value. Our insight and guidance empowers clients to improve organizational efficiency, effectiveness, agility and responsiveness. What sets Everest Group apart is the integration of deep sourcing knowledge, problem-solving skills and original research.