The United States reclaimed the number-one spot as the world’s top
outsourcing market in 2019 after ceding that position to Germany
the previous year, according to a new market analysis from
Information Services Group (ISG) (Nasdaq: III), a leading global
technology research and advisory firm.
The U.S. was ranked first in market opportunity, based on data
from the ISG Outsourcing Viability Index® (OVI), a proprietary
methodology that ranks markets for both growth potential
(opportunity) and delivery maturity. The findings were published in
the annual ISG Momentum® Market Trends & Insights Geography
Report, released earlier this month.
Germany, which took the top spot for opportunity in 2018, fell
to number two, while the United Kingdom, Australia and Japan, in
order, rounded out the top five. The opportunity rankings of the
top 28 markets are based on a mix of data reflecting outsourcing
spending level, penetration, number of large companies and overall
GDP, among other factors.
The OVI opportunity rankings for 2019 were relatively stable
with the prior year; Switzerland was the only market to change more
than two positions, improving from tenth to seventh on the strength
of increased spending by many current customers, along with new
outsourcing adoption. Six of the top 11 markets for opportunity
(Spain and the Netherlands were tied for tenth) are in Europe.
Asia Pacific is home to the three markets most difficult to
penetrate for service providers: China, South Korea and Japan. The
three, in order, ranked lowest in the market competitiveness
dimension of the OVI.
Delivery Maturity
Perennial leader India once again topped the OVI rankings for
delivery maturity, despite finishing next to last for
infrastructure. India earned the top spot by finishing first in
business environment, and number two in both the cost and people
dimensions of the OVI.
Four of the top five countries for service delivery are in the
Asia Pacific region, with Russia, at number four, the lone
exception. Malaysia moved up one position to second, while the
Philippines advanced two positions to third in the 2019 rankings.
China fell from second in 2018 to fifth in 2019, primarily because
of rising costs. China ranks in the bottom five in the real estate,
salary and currency components of the OVI cost dimension. Mexico
also fell in the rankings, from seventh to 11th. The country
improved its position on the infrastructure and business
environment dimensions but was hurt by workforce issues.
Ireland, ranked sixth for delivery maturity, is the highest-cost
country among the 22 evaluated. The country offsets its cost
disadvantage with top-six rankings on two other dimensions,
including the top spot for infrastructure.
Among the up-and-comers, Poland moved up to seventh from ninth
place the prior year, while Costa Rica broke through the top 10 at
number nine after finishing 17th two years earlier. With the Czech
Republic also making the top 10, and with Mexico and Indonesia
dropping out, markets outside of Asia now hold five of the top 10
slots for delivery maturity.
“Countries are trying to attract centers of excellence and other
investments by tech companies, encourage home-grown startups and
prepare their citizens with next-generation work skills. These
efforts are making more countries viable for outsourcing service
delivery,” said Paul Reynolds, partner and chief research officer
of ISG. “India is still the leader, but it has plenty of
competition.”
Meanwhile, on the demand side, the desire to become more digital
continues to drive many outsourcing engagements. “Enterprise
customers want to share risks and rewards with their service
providers to encourage innovation, and they are actively seeking
ways to shift funds from the ‘run’ portion of their operations to
the ‘build’ side to quicken the pace of digitization,” said
Reynolds.
Outsourcing Penetration
The 2019 ISG Momentum® Market Trends & Insights Geography
Report also found the outsourcing penetration rate among Forbes®
Global 2000 companies reached a record 57 percent, up two
percentage points from 2018. Outsourcing penetration among the
G-2000 was highest in Europe, at 73 percent, followed by North
America at 66 percent, and Asia Pacific at 39 percent.
The full, 434-page 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 nearly 50 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 those countries.
To view an executive summary of 2019 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.
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.
# # #
Will Thoretz
Information Services Group, Inc.
+1 203 517 3119
Will.Thoretz@isg-one.com
Jim Baptiste
Matter Communications for ISG
+1 978 518 4527
jbaptiste@matternow.com
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