Outsourced IT Services: Is There Really A Market Slowdown?

GlobalData released their latest analysis of IT services deals, and they seem to show a significant decline in 2017. This decline was shown to affect the number of deals and total contract value (TCV) — which were both down compared to 2016 and 2015. While the TCV witnessed a significant annual decline of 33,3% in 2017 to $61.4 billion, the number of deals announced (4,099) saw a considerable decrease of 25,6% in 2017 compared to 2016, according to the report.

Application outsourcing contracts were the most popular types of deals and accounted for 38.4% of the total number in 2017. However, infrastructure outsourcing contracts dominated the IT service contracts with a TCV of $31.8 billion. North America led in terms of the TCV of the contracts announced in the infrastructure outsourcing segment, with a TCV of $16 billion, followed by Europe with a TCV of $10.6 billion.

IT Outsourcing: What’s Included?

Still, those numbers might be significantly skewed since they do not account for the digital transformation that is taking place within most businesses.

After all, several reports indicate that cloud and managed services are rising rapidly, and the market is extremely healthy. Traditional IT services would certainly be declining as managed services providers (MSPs) change their business model to fit with the changes in business infrastructure and technology.

Piyush Sharma, lead technology analyst at GlobalData, concluded in a prepared statement:

“Within IT solution areas, cloud computing, and information management/analytics segments dominated the IT services segment in 2017, as enterprises are looking to reduce their capital and operation costs and enhance their decision-making process. Moreover, a significant number of deals with a scope of information management are set to expire in 2018, providing opportunities for analytics and business intelligence vendors.”

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    Peter Radizeski:

    Some problems with research data is where do they get the data. I have seen analyst reports about UCaaS revenue that was off my billions – and that just includes public companies! No idea the data points on this research but one-third off of outsourced IT at a time when MSP M&A activity is on the rise???

      Joe Panettieri:

      Hey Peter: You raise great points. But I don’t think MSP M&A is purely tied to a strong market. Demographics suggest that a lot of owners need to sell or will pursue a sale simply based on their age and their need to unlock net worth from their businesses.

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