This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

ISG Outsourcing Index: Global Market Sagged In First Quarter

STAMFORD, Conn., April 11, 2013 /PRNewswire/ -- Information Services Group (ISG) (NASDAQ: III), a leading technology insights, market intelligence and advisory services company, today released data showing the global outsourcing market sagged in the first quarter.

The 1Q13 Global ISG Outsourcing Index, which measures commercial outsourcing contracts with an annual contract value (ACV) of $5 million or more, totaled $3.9 billion, a decline of 27 percent over the first quarter of 2012 and 24 percent over the fourth quarter of 2012.

The weak results masked several bright spots in the market, including a surge in the ACV of the largest contracts, ongoing strength in the business process outsourcing (BPO) segment and a healthy increase in performance in Asia Pacific.

"On the surface, the numbers are less than encouraging, but a different picture emerges when we dig a little deeper and put this quarter into the broader context," said John Keppel, President, ISG Research, and Chief Marketing Officer. "In particular, deal timing seems to have affected the first quarter. But based on our industry pipeline analysis, we expect a more bullish performance in the second half of 2013."

Now in its 42 nd consecutive quarter, the ISG Outsourcing Index (formerly the TPI 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 1Q13 Global ISG Outsourcing Index tallied 223 contracts awarded in the first quarter, a drop of 24 percent from a year ago and 16 percent from the prior quarter. However, the decline was most evident among smaller awards. Mega-relationships – those contracts with an ACV of at least $100 million – rose 54 percent year-over-year and 4 percent sequentially.

By scope, the BPO segment of the market maintained the strength it has displayed since early 2011, with the number of contracts awarded in the first quarter down just 3 percent over a year ago and up 16 percent from the prior quarter. ACV totaled $1.5 billion during the quarter, a decline of 10 percent year-over-year and 18 percent sequentially. Among industries, the Telecommunications and Travel & Transportation sectors significantly outperformed their historical averages for BPO.

Results for the IT outsourcing (ITO) segment of the market dropped sharply. The 127 contracts represented a decline of 34 percent over a year ago and 30 percent over the prior quarter. ACV of $2.4 billion was down 35 percent year-over-year and 28 percent sequentially. Virtually every industry saw ITO fall with the exception of Energy, driven by large deal activity in that sector.

By region, Asia Pacific outperformed the rest of the world in the first quarter. Led by positive results in Australia New Zealand, the region tallied ACV of $440 million, up 8 percent over a year ago but down 23 percent over the prior quarter. The region's trailing 12-month performance is up 80 percent over the prior 12-month period, helped by impressive growth in China and India.

The mature markets in Europe, the Middle East & Africa (EMEA) and the Americas drove down results in those regions during the first quarter. With weakness in the United Kingdom and Germany, EMEA registered ACV of $1.9 billion, down 20 percent year-over-year and 30 percent quarter-over-quarter. However, restructuring ACV in the region was up 12 percent over a year ago and 29 percent over the prior quarter.

In the Americas, ACV of $1.6 billion was down 39 percent year-over-year and 15 percent sequentially, with the United States contributing the most to the decline. However, Americas BPO was up 17 percent over a year ago and 51 percent over the prior quarter, outperforming the ITO segment in that region for the first time.

"Looking ahead, we are keeping our expectations in check for the second quarter, as clearly there remains some softness in the overall market," Keppel said. "That said, as we look out to the remainder of the year, we are seeing positive signs in the marketplace. The continued strength in BPO, now two years in the making; the continued positivity in the emerging markets over the last 12 months; and the impact of timing on deal flow so far this year, which we know from experience will eventually rebound, all point to a healthier outlook for the full year."

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,086.63 -26.91 -0.16%
S&P 500 1,987.01 +3.48 0.18%
NASDAQ 4,473.6970 +17.6810 0.40%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs