Demand for automation, digital tech driving overall market growth; Nearshoring, onshoring trend seen
Sourcing growth is projected to be strongest in countries that already spend the most on services, according to a new market analysis from Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm. The annual ISG Momentum® Geography Report finds the three markets with the highest outsourcing spending in 2017 – the U.S., Germany and the U.K., respectively – also have the highest potential for growth in 2018.
That finding is based on the Outsourcing Viability Index (OVI) for Opportunity, a proprietary ISG methodology that ranks 28 markets on growth potential. Another methodology, the OVI for Delivery Center Maturity, ranks 29 markets on their ability to support outsourcing service delivery.
“Outsourcing spending is on the rise again in most major markets,” said ISG Partner and Chief Research Officer Paul Reynolds. “But rather than seeking out the lowest-cost delivery markets, buyers instead are spending more on automation, cloud services and other digital technologies to transform their businesses for greater efficiency and faster growth.”
Reynolds points out that growing adoption of automation and public cloud technologies is causing buyers to reconsider using distant offshoring destinations, with many now preferring nearshore or onshore models for their sourced services. This, he says, is driving providers to invest more heavily in sourcing markets closest to their customers.
“Buyers are becoming more reluctant to use offshoring for several reasons, some political, others more practical. This trend is leading providers to expand their service delivery capacity in the countries where they have the most customers,” said Reynolds.
The U.S., Germany and U.K. markets, despite being very mature and highly penetrated, continue to present tremendous additional business potential for providers. Japan and Australia, ranked fourth and fifth, respectively, complete the top five markets for outsourcing opportunity, with India sixth, in addition to being the top-ranked country for offshore service delivery.
Behind India, Malaysia surpassed China and Mexico to rank second on the Delivery Center Maturity OVI. The top 10 delivery centers include six Asian, three European and one Latin American country. ISG found signs of rising costs and increasing competition for talent in traditional offshore service hubs, leading providers to invest in both new delivery locations and in increased automation.
The full report provides global, regional, sub-regional and country-level data about outsourcing spending, penetration rates and other key metrics. The report also includes in-depth profiles of more than three dozen countries that are large markets for outsourcing services and/or leading locations for service delivery. Market data is presented in more than 400 charts, tables and other graphics and country profiles include firsthand observations about local outsourcing trends, client preferences and provider activity reported by ISG professionals working in the countries.
To view an executive summary of 2017 ISG Momentum® Market Trends & Insights Geography Report, click here.
The latest ISG Momentum® report is part of an ongoing series of market research reports that focus on outsourcing activity by service line, vertical industry and geographic location. To learn about these or other ISG Momentum® services and information products, please visit the ISG Momentum® Research page on the ISG website.
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 700 clients, including 75 of the top 100 enterprises in the world, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; technology strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,300 professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.