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NelsonHall ITO Index Shows Slight Decline in ITO Bookings Activity in 2013, with Strong Improvement in H2

This week, NelsonHall held its quarterly IT outsourcing (ITO) Index Webcast, conducted by Dominique Raviart, Director ITO Research. The Index assesses developments in ITO bookings activity globally.

Rachael Stormonth, SVP NelsonHall commented: “I would like to commend Dominique on this, his 21st broadcast of NelsonHall’s ITO Index. The amount of data that feeds into his analysis, backed up by our strong understanding of trends in the global ITO market, has made it a must-attend webcast for our listeners; Dominique provides a realistic assessment of what is happening in the market and why.”

This week’s webcast focused on Q4 2013 and full year 2013 performance.

ITO bookings in Q4 2013 were flat globally, following a promising Q3. For full-year 2013, bookings were down 20%, though the level of new scope bookings, at around 40%, was double that of 2012. Nevertheless, the overall ITO bookings total contract value in 2013 was the lowest since 2008.

Overall, ITO bookings are impacted by market saturation, especially in North America, seasonality in government contracts, impact of a number of technologies including cloud computing and the deflationary impact of India offshoring, which is dramatically driving down prices and TCVs.

The decline in bookings in 2013 was led by North America, where bookings are down 45%, reflecting a drop in bookings in the U.S. commercial sector (-30%). In spite of the specific situation in the U.S. federal sector related, the level of contracts remains at the high end of its bookings level range. Commercial sector however in North America is turning away from traditional outsourcing contracts, moving towards more relationships, as opposed to large awards, and high offshore adoption.

Bookings in Europe were up 30% thanks to the commercial sector (+40%) Continental Europe still offers significant untapped potential for IT Outsourcing.

2013 had a number of positives, and H2 was much stronger than H1. A number of factors, including improving macro-economic conditions, point to slightly improved ITO spending in 2014.

About NelsonHall:

NelsonHall, the leading BPO and IT outsourcing research firm with analysts in the U.S., U.K., and Europe, takes a global approach to analysis of outsourcing markets and vendor capabilities. It is widely respected for the quality and depth of its research.

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