Corporates in 'investment mode' boost outsourcing market

Outsourcing market stops shrinking for the first time since 2012

Corporate clients getting back into "investment mode" have helped stop the IT outsourcing (ITO) market from shrinking annually for the first time since 2012.

According to NelsonHall's ITO Index, in the third quarter, ITO spending remained flat compared with the year before. Spending has slumped year on year every quarter since the last three months in 2012 – by as much as 2.5 per cent during some periods – the analyst said.

But corporates have helped buck the trend, according to NelsonHall's ITO research director Dominique Raviart.

"Clearly, the somewhat improved economic conditions have had an effect on ITO spending," he said. "Corporate clients are back into investment mode, awarding slightly higher-scope ITO contracts as well as increasing somewhat their discretionary spending embedded into long-term contracts."

Despite spending remaining flat, ITO bookings over the Q1 and Q3 period this year were down by 20 per cent, he said, adding that this figure was perhaps not as bad as it seems at first glance.

"An important key performance indicator (KPI) is the level of new-scope contracts – as opposed to existing-scope contracts – and was an estimated 40 per cent for the Q1-Q3 2014 period," he said. "This level is at the higher end of the traditional range and is good news. Europe is slightly higher than North America on this KPI."