Our geographic analysis of global outsourcing activity in 2014 could be titled “Rising Globally, Driven Locally.” On a global level, outsourcing engagements and spending were on the rise in most major markets. Locally, we identified a variety of business conditions and sourcing catalysts that drove activity in the dozens of countries we studied. For instance, we found parts of Europe and other major markets are outsourcing locally, with a growing preference for onshore or nearshore service delivery, options that are available now only after years of investment in new service centers and expanded infrastructure by service providers and governments.
The ISG Momentum® Market Trends & Insights 2014 Geography Report also found:
- Outsourcing spending rose in the four major markets in the Americas (U.S., Canada, Brazil and Mexico). With business confidence high in the U.S. at the end of 2014, clients pursued outsourcing agreements to support anticipated growth.
- Nearshore service delivery from Latin America expanded. Mexico remained the leading nearshore destination, but ISG identified growing interest and service delivery activity throughout Central and South America, including emerging, lower-cost locations in Chile, Colombia and Peru.
- Politics and international intrigue affected outsourcing decisions in Europe, where outsourcing clients were troubled by the NSA snooping scandal. Clients carefully considered where to store and how to protect their data. Many clients now require, or strongly prefer, that data be kept within EU jurisdiction. Some global service providers marketed their data centers in Germany and Switzerland to competitive advantage, while providers in Eastern and Central Europe attracted new clients with their expanded capabilities. Though data security gave clients pause, outsourcing activity continued at a high level, with spending growth in Northern Europe and the less mature markets around the Mediterranean.
- Both outsourcing spending and service delivery grew throughout the Asia Pacific region. Though India’s economy is facing strong headwinds, its domestic outsourcing market experienced strong growth and the country maintained its predominance in offshore service delivery. Similarly, economic growth slowed while outsourcing adoption increased in China, a country with tremendous growth potential as an outsourcing market.
The table below presents a snapshot of outsourcing activity and maturity around the world:
|Figure 1: Forbes®Global 2000 Client Outsourcing Metrics by Region|
|2014 Market Spend through Q3 (US$M)||Number of G2000 Companies||Outsourcing Penetration Rate||Average ACV Per Company (US$M)|
|Source: ISG Research. Data through Q3 2014.|
In this year’s report, we unveiled our new Outsourcing Viability Index® (OVI) rankings made up of two separate indices to rate countries on their market strength and their suitability to support service delivery. According to the OVI, the U.K. measured highest for its short-term growth potential, competitive environment for outsourcing service providers and overall friendliness to business. Many more countries are emerging as viable locations to set up presence for service delivery.
The ISG Momentum® Market Trends & Insights 2014 Geography Report found a world of opportunity for outsourcing with varying conditions in each country. The report details the local outsourcing business challenges, goals and preferences that drive outsourcing activity around the world.