BOSTON & LONDON & PARIS--(BUSINESS WIRE)--This week, NelsonHall held its quarterly IT outsourcing (ITO) Index Webcast, conducted by Dominique Raviart, Director ITO Research.
The Index assesses developments in the ITO market by providing two complementary analyses: one focused on IT services and ITO spending and the other on bookings (i.e. contracts signed). The Index therefore provides a dual view on market conditions in ITO by providing a short-term view of how spending is to evolve in the next quarter (the spending analysis) and how it will evolve in the mid-term, in the next 12 to 18 months (the bookings analysis).
This week’s webcast focused on Q4 2014 announced ITO contract activity and estimated spending during the quarter for IT services, ITO and professional services. It also forecast full year 2015 spending growth in IT services and ITO.
NelsonHall estimates IT services spending in Q4 2014 was up ~2.0%, driven by spending in professional services (+3%). ITO spending growth was slightly positive during the quarter. According to Dominique Raviart, “IT outsourcing spending in Q4 2014 returned to positive growth after a flat Q3 and 6 consecutive quarters of spending decline”. Corporate clients are resuming their investments, awarding slightly higher scope ITO contracts as well as increasing somewhat their discretionary spending embedded into long-term contracts”.
ITO bookings were up 50% in Q4. Growth was driven by North America where bookings increased by 700% to ~$5bn. The growth in the region was driven by two mega-deals. Raviart commented “the high ITO bookings growth in Q4 2014 in North America looks impressive but largely reflects a very low level of contract activity in Q4 2013. In fact, the level of bookings in Q4 2014 in the region is back to normal and does not reflect any major change in market dynamics”.
Europe declined by 15% in Q4 and was overall flat in 2014. Activity during full-year was to average level of ITO bookings, driven by commercial sector and a 40% drop in government bookings in 2014.
Activity in fast-growth countries (India, Brazil, China) was anecdotal.
An important KPI is the level of new scope contracts (as opposed to existing scope contracts) and was an estimated 40% during full-year 2014. This level is somewhat higher than in 2013 (up by 500 bps) and 2012. Both North America and Europe had a similar level of new scope contracts (40%).
Raviart commented “growth in ITO bookings in full-year 2014 was flat compared to 2013. Level of bookings remained historically low along with 2008 and 2013. Yet, a positive news is that the level of new scope contracts has somewhat improved. This together with the overall better economic forecasts in most geographies in the world suggests an acceleration in ITO spending in 2015”.
Looking ahead to 2015, NelsonHall forecasts short-term growth in worldwide IT services spending of 2.5% to 3.5%, with ITO spending growth in the 1% to 2% range.
NelsonHall is the leading global BPO and IT outsourcing research & analysis firm with analysts across the U.S., U.K. and Continental Europe.
Founded in 1998, The Company takes a global approach to analysis of vendors and outsourcing markets and is widely respected for the quality and depth of its research.
NelsonHall also offers a suite of "Speed-to-Source" tools, (NEAT), that assist buy-side executives in saving time and money, while enhancing the quality of their sourcing decisions, in business process outsourcing and IT outsourcing evaluations.