ISG Research Identifies Top Growth Industries for Sourcing
Report spotlights new growth markets for 2019, reviews 2018 industry performance
STAMFORD, Conn., June 28, 2019 /PRNewswire/ -- Technology hardware and equipment, banking and insurance are the top three industries primed for significant outsourcing growth in 2019, according to a new market research report from Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.
Proprietary analysis from the 2019 ISG Momentum® Market Trends & Insights Vertical Report shows the top three industries for growth potential in 2019 also were among the top four in 2018 annual contract value (ACV), trailing only telecommunications, the perennial leader and an outlier whose ACV is inflated by the support contracts carriers sign among themselves.
Diversified financials and utilities ranked as numbers four and five on the list of industries with the most potential for growth from new clients. ISG determines the growth potential of each industry based on the number of Forbes® Global 2000 companies in each sector that currently do not outsource and each sector's average per-company spending level, weighted by company size.
Ranked by ACV, the top five vertical industry segments for outsourcing spending in 2018 were telecommunications services ($19.1 billion); banking ($13.0 billion); technology hardware and equipment ($6.2 billion); insurance ($5.5 billion), and oil and gas operations ($3.4 billion). Excluding telecommunications, average per-company outsourcing spending in 2018 was $61 million annually among the G2000 companies in the 26 other industries analyzed by ISG.
Outsourcing ACV in 2018 fell in most verticals, but 15 of the 27 industries measured came within $200 million of their prior-year total.
The seven verticals that produced year-over-year increases in outsourcing ACV—trading companies, health care equipment and services, retailing, semiconductors, food markets, media, and hotels, restaurants and leisure—are mostly consumer-facing, pointing to the growing use of providers offering the latest digital technology capabilities to enhance customer experience.
In 2018, outsourcing penetration generally rose, and was again highest in the telecommunications services sector, where 91 percent outsource, matched by the media industry (also 91 percent), followed by aerospace and defense (86 percent). Overall, across the 27 industries profiled, sourcing penetration was 57 percent, on average.
"The big picture of what's happening in outsourcing often looks quite different from what is happening in a particular industry. In 2019, we made a point of investigating digital influences across these 27 important industries, and uncovered many insights on how newer technologies, business strategies and sourcing models are being accepted and pursued in different markets," said Paul Reynolds, ISG partner and chief research officer. "The pace of technology growth, and the widespread adoption of emerging technologies such as AI, blockchain and RPA, present tremendous opportunity for service providers."
The 2019 ISG Momentum® Market Trends & Insights Vertical Report provides an industry-by-industry look into outsourcing spending patterns, emerging preferences and other trends across 27 Forbes®-classified vertical markets. The analysis, covering Forbes® Global 2000 companies with annual outsourcing spending of $5 million or more, offers perspective into the state of outsourcing in each vertical through interviews with strategists involved in current outsourcing engagements in that industry, along with worldwide spending and market share data showing current levels and up to 10 years of history. Each detailed industry chapter in the 406-page report notes how current events and macroeconomic conditions are shaping each industry.
To view an abbreviated executive summary, visit this webpage.
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 more about these and other ISG Momentum® services and information products, please visit the ISG Momentum® Research page on the ISG website or contact ISG.
About ISG
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 more than 70 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; 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 digital-ready 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.
SOURCE Information Services Group, Inc.
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