According to the Global ISG Outsourcing Index, which measures commercial outsourcing contracts with an annual contract value (ACV) of US$5mn or more, the global outsourcing market grew significantly in Q3’13. ACV for the quarter (US$5.8bn) increased by 66% from Q2’13. The Q3’13 results compensated for a weak 1H’13 and increased YoY performance by 1%. IT Outsourcing (ITO) ACV of US$4.4bn in Q3’13 was the best third quarter ever, up more than 100% sequentially. Additionally, the 247 contracts recorded were the highest of any quarter historically. From an industry perspective, Financial Services recorded US$1.4bn in ITO ACV; Telecom and Business Services also demonstrated strength.1
The Q3’13 EMEA ISG Outsourcing Index, which measures commercial outsourcing contracts with an annual contract value (ACV) of €4mn or more, showed that 176 contracts with a value of €2.8bn were awarded in the region during the third quarter. The number of contracts (the highest ever recorded in a single quarter in EMEA) witnessed a 60% increase both QoQ and YoY; while ACV was up 89% over the previous quarter and 16% over last year. The Americas Q3’13 ACV stood at US$1.8bn, an increase of 65% QoQ, but down 7% YoY. Year-to-date ACV of US$4.9bn was down by 26% compared to last year. Asia Pacific’s ACV of US$0.45bn was its lowest quarterly total since Q2’11, and represented a slight decline QoQ and a moderate decline YoY. Contributing to the quarter’s weakness was a dearth of deals above US$40mn. For the year, the region has registered only four such deals, the fewest since 2000. In contrast to global trends, Asia Pacific did not show a significant increase in contracting activity.1
Market cap for Software Services companies witnessed robust growth in the current quarter, after recording a sharp decline in Q2’13. Improving market conditions and rising investor confidence led to the growth. Market cap for Cognizant Technology saw the highest increase of 31.6% in the current quarter, followed by HCL Technologies at 24.3%.
CSC witnessed net income growth of 30.1% in the current quarter as compared to Q2’13, primarily due to a decline in costs of services (COS) resulting from management's restructuring efforts that were directed to align resources to support business needs. Moreover, the account management services which were included in COS during fiscal year 2013, were redirected to sales activities in fiscal year 2014. The company also acquired Infochimps, Inc., a privately held company, in an all-cash transaction for US$27mn. The acquisition complements CSC’s existing big data business by providing a flexible, scalable platform-as-a-service offering.
Infosys’ YoY decline of 11.1% in net profit was attributable to a 4.5% decrease in operating profit as a percentage of revenue. The decline in net profit was due to the 37.2% decrease in other income which was partially offset by a decrease of 0.3% in the effective tax rate. Moreover, the segment profitability also declined due to compensation increases given to offshore and onsite employees during the last 12 months, adverse cross currency movements and an increase in onsite labor mix.
According to Gartner, the global IT Outsourcing market is forecast to grow by 2.6% during 2013, slightly down from 2.8% in its prior forecast. The market is expected to grow by more than US$7bn to US$287bn in 2013.2