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Lukewarm global IT outsourcing market heats up in third quarter

Stephanie Overby | Oct. 28, 2013
The first half of the year was relatively quiet for global IT outsourcing deals, but activity has picked up considerably in the third quarter. Outsourcing consultancy ISG examines why and predicts how the IT outsourcing market will finish out the year.

ISG predicts the outsourcing market will finish out the year strong, but still end down compared to 2012 due to weakness in the first half of the year. "We'd need a $9 billion dollar fourth quarter for a rebound, which would be unprecedented," Herrera says.

Next year could see a slight uptick in activity or remain flat , says Herrera, in part because 2009 was a big year for contracting activity and those deals will be coming to an end. In addition, outsourcing in the mid-market should continue to grow.

What's more certain is that outsourcing deals going forward will be smaller and shorter. "It's the new normal and it's happened very quickly over the last two years," Herrera says. "It coincides with greater maturity on the client side in terms of managing relationships. While there's some downside to having multiple providers and the friction that can occur, there's a great upside in keeping them on their toes and making sure everyone is best in breed. A lot of companies have decided that the advantages outweigh the disadvantages."

 

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