Press Release

ISG Sees Sourcing Market Expanding Despite Decline of Mega Deals

Overall demand for sourcing up, driven by 20%-plus growth in cloud-based solutions;

With traditional market fragmenting, billion-dollar deals down more than half in last 20 years

Company Release - 7/2/2019 9:00 AM ET

STAMFORD, Conn., July 2, 2019 /PRNewswire/ -- The global sourcing market is expanding due to growing demand for cloud-based as-a-service solutions and other digital transformation services, even as the number of billion-dollar deals continues to decline as a result of market fragmentation, according to new research from Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

"The cloud has democratized access to technology, so technology spending is up," said Stanton Jones, director and principal analyst, ISG Research, who will discuss the findings as part of the ISG Index™ Insider segment on the 2Q19 Global ISG Index conference call and webcast July 10.

He cited recent ISG research that found more than 80 percent of respondents indicating their IT spending as a percentage of revenue will be increasing over the next two years.

"This is why the pie is bigger today," Jones said. "Technology is now the business. And there are a lot more technology buyers out there, thanks to cloud."

Although the overall market is expanding, the market for traditional sourcing is fragmenting, as enterprise buyers eschew the mega deals of the past in favor of shorter, smaller contracts that allow them to remain nimble in the face of rapid-fire changes in the technology landscape and shifting business and consumer demands.

Amid this fragmentation, the traditional sourcing market is growing between 3 percent and 5 percent annually, according to ISG's market research data, while the as-a-service (infrastructure-as-a-service and software-as-a-service) market is consolidating and growing by more than 20 percent annually.

The fragmentation of the traditional sourcing market is reflected in the decline of the billion-dollar sourcing deal. ISG's analysis shows that from first generation of outsourcing (1999-2006) – which ISG calls "the heyday of the billion-dollar deal" – to the current third generation (2015-present), the number of billion-dollar sourcing deals per year has declined by more than half.

"That's not to say the billion-dollar deal is completely dead; it's just not as common as it was 10 years ago," said Jones.

"These days, very few enterprises are sourcing their entire IT environment to a single service provider," he added. "For the last couple of decades, companies have been sourcing towers like applications, infrastructure and workplace. But those towers are getting further disaggregated and spread out among a number of service providers and technology vendors."

These changes did not occur overnight, but accelerated over the last three years, Jones said. "It's now common to see 20 to 30 percent of applications that used to run on provider infrastructure shifting to the cloud on an annual basis. This fundamentally changes the application support model. The cloud vendor is doing it better now because they are managing one instance for all customers, rather than a unique one for each customer."

For providers to survive and thrive, they need to offer traditional and as-a-service solutions together, "because that's how enterprises are using these services today – it's not a binary thing," Jones said.

"Those providers that can operate in both worlds – helping enterprises integrate their traditional legacy infrastructure and applications with new digital offerings – will be the ones to succeed in the long run," said Jones. "It's all about stitching everything together into something that creates business value and enables companies to compete at digital speed."

Jones can be seen discussing "The Death of the Billon-Dollar Deal" in this video. Further details will be shared during the 2Q19 Global ISG Index conference call and webcast, July 10, starting at 9 a.m., U.S. Eastern Time. Click here to register for the call.

About ISG

ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 700 clients, including more than 70 of the top 100 enterprises in the world, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,300 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry's most comprehensive marketplace data. For more information, visit www.isg-one.com.

 

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/isg-sees-sourcing-market-expanding-despite-decline-of-mega-deals-300878960.html

SOURCE Information Services Group, Inc.