Outsourcing Keeps Falling While Digital Picks Up the Slack, According to Everest Group Report on Top Trends in Global Sourcing

DALLAS, August 26, 2019 /PRNewswire-PRWeb/ -- The global sourcing industry posted a decline in transactions in the second quarter of 2019 as compared to Q1 2019, dropping from 501 transactions to 474, according to Everest Group. This marks the second consecutive quarter of declining transactions and a 3% year-on-year decline from Q2 2018 (489 transactions).

However, within the global outsourcing activity, the share of digital-focused deals continues to rise overall, posting a significant increase from 70% in Q1 to 78% in Q2. Cloud continues to be the dominant digital component, included in 46% of outsourcing transactions. Automation, artificial intelligence (AI) and analytics also factor heavily in driving digital transactions.

"Less than five years ago, digital capabilities were a competitive differentiator, but today they are a competitive must," said H. Karthik, partner, Global Sourcing, at Everest Group. "As a result, enterprises and service providers alike are making significant investments in digital technologies to enhance customer experience and improve efficiency. We're seeing this play out across the global sourcing landscape in the scope of outsourcing deals, the investments being made in internal capabilities, the focus of acquisitions and partnerships, and the recruitment of talent."

These global sourcing trends are detailed in Everest Group's recently released Market Vista(TM): Q3 2019 report. The report shines a spotlight on activity in the digital space, profiling key developments such as alliances, mergers and acquisitions (M&As), outsourcing deals, financial reports, Global In-house Center (GIC) or Shared Services Center (SSC) activity, and delivery locations.

Highlights:

    --  Digital-focused GICs for offshore/nearshore locations formed 67% of the
        total new center setups, compared to 46% in Q1 2019, with AI included in
        67% of GIC setups and expansions. Similarly, the share of
        digital-focused GICs in onshore locations grew from 44% to 49% in Q2
        2019 over the last quarter, with AI included in 78% of onshore GIC
        transactions.
    --  Although the share of digital in M&A activity declined significantly in
        Q2, digital-focused alliances increased due to cost benefits for
        enterprises and the opportunity to jointly utilize resources for
        capability expansion. Examples include the following transactions:
    --  Accenture partnered with General Employee Benefits to jointly launch a
        blockchain solution to provide employee benefits such as life and
        healthcare insurance.
    --  ADP partnered with Google Cloud to launch identity services automation
        solution with Google Cloud's Identity and G Suite. The partnership will
        enable customers to unite HR and identity solutions to simplify user
        lifecycle management.
    --  HCL partnered with PTC Capability to launch Realtime Manufacturing
        Insights (RMI), an IoT solution that leverages PTC's ThingWorx
        industrial IoT and Kepware industrial connectivity platforms.

Other notable Q2 trends:

    --  The overall outsourcing transaction activity witnessed a substantial
        decline. The share of Market Vista(TM) Index service providers also
        decreased slightly in Q2 2019 as compared to the previous quarter.
        Within Market Vista(TM) Index service providers, deal activity from
        global service providers witnessed a significant decline in the volume
        of deals, as compared with the previous quarter.
    --  Deals for Banking, Financial Services and Insurance (BFSI) and
        government were the highest among all industry verticals.
    --  The technology and communications vertical experienced a decline due to
        a slowdown in telecom in the wake of financial stress and industry
        consolidation.
    --  Technology and communications enterprises increased their GIC setups for
        business processes in North America to deliver finance and customer
        support services.
    --  Business process focused center setups declined in India, slowing down
        Asia Pacific at large; service providers were primarily responsible for
        this decline.

***Download a complimentary 18-page abstract of the report***

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. Details and in-depth content are available at http://www.everestgrp.com.

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SOURCE Everest Group