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ITO Bookings Continue to Decline, Digital Transformation Spend Set to Climb

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On October 6th, NelsonHall held its quarterly IT outsourcing (ITO) Index webcast, presented by Dominique Raviart, Research Director for IT Services research.

In Q3 2015, ITO bookings were down 30% year-on-year overall. In North America, bookings declined by 60% y/y, while Europe was up 60% y/y. Over the Q1-Q3 2015 period, ITO bookings were down 30% y/y overall. North America was down 30% y/y during the period, with Europe down 20% y/y.

An important KPI is the level of new-scope contracts (as opposed to existing scope contracts) and this was an estimated 14% during Q3 2015, the lowest level since Q4 2012. However, over the Q1-Q3 2015 period, the percentage of new-scope contracts was ~40%, a level similar to that of full-year 2014 globally and across North America and Europe.

The number of deals during Q3 was around a dozen, with one mega-deal and the rest in the $100m-$999m range. This is at the lower end of the traditional range.

NelsonHall’s forecast for spending in IT services, IT outsourcing and professional services for the rest of the year and into 2016 remains cautious, despite improved economic conditions in mature countries. Specifically:

  • Spending in IT infrastructure management will only grow marginally, resulting from the impact of Indian offshoring (which currently has a 10% market share) and increasing public cloud (market share 6%)
  • Spending in professional services will remain cyclical and continue to increase along with better economic conditions
  • However, spending on digital transformation professional services (i.e. analytics and big data; SaaS application services; e-commerce, mobility & user experience; IoT) will rise. As a result, spending on non-digital transformation will be flat
  • Client shift in demand towards digital will impact IT services vendors and result in restructuring.

NelsonHall's quarterly ITO Index is an essential monitor for buy-side organizations and service vendors who wish to keep up-to-date with the latest contract awards and market developments. NelsonHall's IT Services research program delivers the most comprehensive insight into ITS markets, including Digital Transformation, Cloud (IaaS), Big Data & Analytics, IoT, Software Testing, Application Outsourcing, Managed Security Services, and Infrastructure Management.


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