IT outsourcing shows slump in the first quarter of 2013

declining performance

A recent report from the ISG (Information Services Group), a leader in providing technology insights and market intelligence, states that in the first quarter of 2013, the IT outsourcing market was seen to have sagged. The company that also offers advisory services says that performance has improved in the Asia Pacific region.

A total of $3.9 billion was recorded as 1Q13 Global ISG Outsourcing Index. This index estimates the value of outsourcing contracts (commercial) that have a contract value annually (ACV) of at least $5 million if not more. This indicates a decrease of 27% and 24% compared to the first and fourth quarters of 2012, respectively. These negative results played down constructive aspects that had emerged in the first quarter for the IT outsourcing sector.

Formerly known as the TPI Index, the ISG Outsourcing Index supplies a quarterly review regarding the latest figures in the IT outsourcing industry to service providers, media and analysts. Its helps keep clients in pace with the latest trends in the BPO sector that is undergoing a constant evolution. The index estimates that 223 contracts were brokered in the quarter Q1. This indicates a decrease of 24% and 16% from the previous year and the quarter before that, respectively.

Agreements that were mega-relationships or deals with a minimum ACV of $100 million showed an increase of 54% annually, and a sequential rise of 4%. As regards the BPO sector, Travel & Transportation and Telecommunications surpassed their historical averages. The ACV came to a total of $1.5 billion. The number of deals made in the first quarter reduced 3% compared to the previous year. There was a 16% increase in this number from the preceding quarter.

Slump expected to continue in the next quarter

The IT outsourcing industry is expected to continue this trend in the second quarter. There are apparently some downfalls that will be inevitable. Meanwhile, Infosys, the second largest exporter of software services in India, saw its stocks fall by 21%.  This was the biggest fall registered in a single day since 2003. This slump erased most of the profits gained this year.

However, bright prospects are expected for the remaining year as a whole. Positive signs are in the horizon for the IT outsourcing industry. The strength gained by BPO for the past two years is predicted to push the market forward to a vigorous path

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