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Outsourcing Growth In Mid-Tier Raises Challenges, Opportunities

Stocks in this article: III

STAMFORD, Conn., July 25, 2012 /PRNewswire/ -- Information Services Group (ISG) (NASDAQ: III), a leading technology insights, market intelligence and advisory services company, today published ISG Research showing unprecedented growth in the use of outsourcing by mid-tier organizations, presenting buyers and service providers with new challenges but also expanded opportunities.

"Organizations starting on the sourcing journey often don't know what they don't know about defining objectives, selecting a provider and managing a relationship," said Deborah Card, Partner, Research Services, ISG. "This lack of experience presents a risk. At the same time, first-time outsourcing clients can benefit from the lessons already learned in the marketplace, avoiding many potential mistakes."

Momentum research from ISG Research shows that sourcing activity is entrenched in the world's largest organizations, with over two-thirds of the top 500 companies in the Forbes Global 2000 already engaged in outsourcing prior to 2008. By contrast, fewer than 10 percent of the remaining G2000 companies entered into an outsourcing agreement between 2008 and 2011. 

"Based on discussions with executives,  we believe a significant number of mid-tier organizations will enter the sourcing market for the first time over the next 12 to 18 months," said Card. "To be successful, these clients will need to have an understanding of negotiating techniques and market conditions. The ability to assess offerings in the context of competitive industry dynamics will be especially critical."

The research further shows that between 2008 and 2011, more than 408 different service providers won outsourcing deals among the Global 2000, a sign that the days when a few major players owned the market are clearly over. 

"The growing number of providers reflects a high degree of market complexity," said Card. "Today's buyers require fact-based analyses to understand and effectively navigate a broad range of provider strategies, capabilities and options."

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