New research from Information Services Group, a technology services company, has found that of 109 insurance companies, 56 percent outsourced in 2013.
The "2014 Momentum Market Trends & Insights Vertical Report" includes detailed data and insights on outsourcing activity among the world's 2,000 largest public companies in 27 vertical industries. There were equal amounts of volatility (double-digit annual contract value swings in 11 of the 27 industries) and stability (12 of the 27 industries saw ACV changes of 5 percent or less) in outsourcing activity in the last year. Spending was subdued in most verticals as clients took advantage of intense service provider competition and cheaper cloud computing and X-as-a-Service (e.g. Software-as-a-Service, Infrastructure-as-a-Service, Business Process-as-a-Service, etc.) offerings to reduce their service delivery costs, ISG said.
While it was challenging for service providers to grow ACV in most verticals, outsourcing penetration overall continued to rise. Currently, 45 percent of the world's largest public companies have an active outsourcing contract, up from 40 percent in 2010. Risk reduction was a common theme in recent outsourcing engagements; the outsourcing penetration rate ranges from a low of 24 percent in the construction vertical to a high of 82 percent in telecommunications.
Clients are demanding specific industry expertise from their service providers and splitting the scope of their outsourced services, so they can work with more best-of-breed providers, said ISG. The 2014 Momentum Market Trends & Insights Vertical Report is part of a series of quarterly reports that focus on outsourcing activity by service line, vertical industry and geographic location.
"Media companies are expanding the scope of their activity beyond ITO and are now using outsourcing to support their strategic repositioning in response to the digital disruption in the industry," said ISG Chief Research Officer Paul Reynolds. "Growth in the hotels, restaurants and leisure vertical is coming from a small base and is motivated by the desire to increase speed of innovation. In contrast, telecommunications services remain one of the most sophisticated and mature markets, and much of the outsourcing activity there involves network sharing and support agreements among telecommunications providers themselves."
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