Press Release

ISG Outsourcing Index®: Industry Ends Year on High Note

4Q ACV up 5%, to $7 billion, highest quarterly level in 4 years

4Q performance fueled by larger awards, bucking trend toward smaller deals

2015 contract awards at all-time high, even as ACV declines 8% for the year

Average ACV and contract duration continued downward trend in 2015

Company Release - 1/14/2016 11:16 AM ET

STAMFORD, Conn., Jan. 14, 2016 /PRNewswire/ -- The global outsourcing industry delivered one of its best quarterly performances ever in the fourth quarter, capping a year that saw a record number of contracts, but also a continuing trend toward lower contract values and shorter durations, according to data released today by Information Services Group (ISG) (NASDAQ: III), a leading technology insights, market intelligence and advisory services company.

Data from the ISG Outsourcing Index®, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, show that fourth-quarter ACV rose 5 percent, to $7.0 billion, the highest quarterly ACV in the last four years. This result was fueled by nine mega-relationships (contracts with annual value of $100 million or more) in the quarter, an anomaly that runs counter to the prevailing trend away from large deals and toward a higher number of smaller contracts.

For the full year, volume reached a record 1,445 contracts, up 2 percent over 2014, even as 2015 ACV, at $23.7 billion, declined 8 percent. Almost all of the ACV shortfall can be pegged to the information technology outsourcing (ITO) market, which declined in annual value by $2 billion or 12 percent from last year as more infrastructure moves to the more flexibly priced cloud environment.

"The data this quarter and this year confirm more enterprises are sourcing than ever before, and they're paying less for those services, which encourages them to participate in the sourcing market even more," said John Keppel, partner and president of ISG. "They're buying flexibility with cost variability, utilizing smaller deals more than ever as they revamp their processes around cloud, digitalization and automation. Outsourcing continues to have a strong value proposition as we exit 2015 and enter 2016."

Trend toward More and Smaller Contracts

The fourth quarter "continued the extended period of lively contracting activity," Keppel said. In addition to the record number of contracts overall in 2015, the number of restructured contracts (484) also reached a new high, and new scope awards (961) reached a near-record best, even as their annual values declined 6 percent and 9 percent, respectively, for the year.

The longer-term trend toward more and smaller deals is evidenced by the considerable decline in ACV over the last decade, most notably the 20 percent drop in average ACV between 2012 and 2015. The 23 mega-relationship awards signed in 2015 marks a new low not seen in a decade.

Similarly, the average contract duration has dropped proportionally. The 3.5-year average in 2015 is a full 15 percent shorter than it was three years ago. Currently, ISG is observing many deals of three years or less in the marketplace.


The Americas posted its eighth consecutive quarter of ACV above $2 billion, underscoring a sustained period of market health. ACV in the region, however, was flat in both the fourth quarter ($2.6 billion) and full year ($9.8 billion) versus a strong 2014. The 687 contracts signed in the Americas during 2015 was a new record, driven in part by a record number (252) of restructured contracts, valued at an all-time high of $4.5 billion.

ITO in the Americas was pushed to record highs for value ($6.7 billion) and volume (444 contracts) by application design and maintenance (ADM) work, which accounted for $3.5 billion of the region's ITO awards in 2015. Business process outsourcing (BPO), on the other hand, saw its value decline 11 percent, to $3.1 billion, but volume increase 16 percent on contact center and R&D/engineering work.

Among industries, manufacturing rebounded strongly in 2015, with ACV up 19 percent and the number of awards climbing 16 percent to an all-time high, due to increased demand for embedded technology and engineering services, as well as timing of new contracts. Other standout sectors included travel and transport and retail, with ACV in retail up more than a third from 2014. Financial services, telecom and energy lagged behind 2014 results.

Europe, Middle East and Africa (EMEA)

EMEA, the world's largest outsourcing market, posted a strong finish to the year, with ACV rising 17 percent in the fourth quarter, to $3.9 billion, fueled by the signing of five mega-relationships. For the full year, however, the region could not overcome a sluggish first half, with ACV declining 8 percent, to $11.7 billion, and volume down 7 percent, to 601 contracts, in 2015. All of the decline in ACV for the year was attributable to a falloff in ITO, as the number of large infrastructure awards dropped sharply and value was lower on smaller deals overall. BPO, meanwhile, grew by double digits, both in value and volume, led by industry-specific work in contact centers.

The region's two largest markets – the U.K. and DACH – went in opposite directions. The U.K. fell short of its strong 2014 showing, with full-year ACV sinking 19 percent to its lowest point since 2009, although contract count reached a new high. DACH, meanwhile, saw its ACV surge 69 percent, aided by Siemens' large renewal with Atos, even as its contract count fell to its lowest level since 2007. France, a stellar performer in 2014, saw its ACV fall 70 percent in 2015.

Industries generally tightened across the board. Telecom saw its ACV dip 13 percent, but its contract activity spike by 43 percent on a record number of deals. Likewise, travel and transport ACV slumped 15 percent from 2014, but reached new highs in contracting activity. The region's historically largest verticals – financial services and manufacturing – showed mixed results. Aided by one large award, manufacturing posted an 8 percent gain in ACV, while financial services ACV declined 4 percent against the prior year.

Asia Pacific

Coming off a strong 2014, Asia Pacific, ever volatile because of its small size, had a rocky 2015, with ACV in the fourth quarter and full year each down a third over the prior-year periods, and sinking to its lowest full-year level since 2006. Contract volume declined 8 percent for the year, yet still reached its third-highest level ever. Both new scope and restructured contracts saw drops in value and volume, and results overall were held back by the lack of large ITO deals, with ACV coming in at its lowest level since 2006. BPO, meanwhile, rose 14 percent off a small base, with most deals coming in contact center and industry-specific work.

Among major markets, Australia-New Zealand turned in its second-lowest full-year ACV in the last decade, while India saw its ACV drop 28 percent, even with a 6 percent rise in deal counts. Likewise, the region's largest industries – manufacturing and financial services – saw their ACV plummet and contract counts decline. Energy was a notable bright spot, with a 33 percent increase in ACV over 2014 and a record number of awards.

Looking Ahead

ISG said it expects a tepid start to 2016, with ACV growth only in the low single digits over the first two quarters compared with the weak first half of 2015. "We expect activity to pick up across all regions in the second half," Keppel said. "Now that clients have realized the flexibility and value inherent in shorter, smaller contracts, they won't give that up. We expect the trend toward lower contract values and shorter-term commitments to continue."

Now in its 53rd consecutive quarter, the ISG Outsourcing Index® provides a quarterly review of the latest sourcing industry data and trends for clients, service providers, analysts and the media. For more than a decade, it has been the authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider performance.

The 4Q 2015 ISG Outsourcing Index® was presented during a conference call and webcast for media and analysts today. To listen to an audio replay of the call and view presentation slides, please visit To view an infographic highlighting the latest ISG Outsourcing Index® results, please visit

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.

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SOURCE Information Services Group