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Q3 a "Landmark" Quarter for IT Outsourcing - ITO Index

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  • Posted: November 12, 2014

More investments in professional services drove an increase in IT services spending to 1.5 percent in Q3 according to BPO and IT outsourcing research and analysis firm NelsonHall's quarterly IT outsourcing index.

NelsonHall director of ITO research Dominique Raviart said the third quarter of 2014 was a "landmark quarter" for IT outsourcing, and the first time since Q4 of 2012 that market spending was not negative.

Raviart added that businesses have resumed investing in ITO, signing higher scope contracts, and somewhat boosting discretionary investments in long-term contracts.  Meanwhile, ITO bookings or contracts signed dropped 20 percent from the first to third quarters of 2014 due to negative values in North America. 

The commercial sector increased bookings to 90 percent but with low total contract value (TCV) levels.  Public sector bookings were down 70 percent, also with low TCV levels.  Similarly, ITO bookings in Europe dropped significantly in both the commercial and public sectors, with low TCV levels.

The level of new scope contracts, a key performance indicator (KPI), was at 40 percent or at the higher end of the normal range.  Europe was slightly higher than North America on this KPI. 

For 2015, NelsonHall expects IT services spending to increase to 3 percent due to offshoring driving down prices and causing lower spending in general.  ITO spending in 2015 is expected to remain flat mainly because of low level ITO contracts.