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MOSL: TECHNOLOGY-ISG Index - Growth in deal wins continues-Acceleration takes a breather amid decision slowdown in the US

Technology: ISG Index - Growth in deal wins continues; Acceleration takes a breather amid decision slowdown in the US 

 

We attended a quarterly call by ISG, where it cited the progress on deal wins and key developments in the IT industry. With traditional sourcing a major component of the deals data tracked by ISG, the trends hold relevance from Indian IT Services’ perspective. Key highlights:

• Total deals ACV (annualized contract value) continued to rise, but traditional deals ACV came off in the US (growth supported by APAC and EMEA on a low base).
• There was some slowdown in decision making in the US through the course of 1QCY19. There has been tendency to drive cost savings and operational excellence. This could be just settling of activity levels on a high CY18 base too, according to the ISG. ISG tapered the outlook for 2019 traditional sourcing ACV growth to 3.2% from 4%.
• Infrastructure as a Service (IaaS) and Software as a Service (SaaS) continue to surge in deal sizes. IaaS is helping service providers and showing no signs of slowing, while SaaS is hurting. Digital Systems Integration remains a massive opportunity just having scratched the surface.
• Talent crunch is severe and driving some M&A activity in the sector, such as Luxoft. Despite the constrained supply, pricing is not inching higher – macro in part has a role to play.
• Indian mid-tier providers are in a sweet spot, given their agility to navigate to newer areas and service demand.
• Captives will continue gaining prominence as Digital spending is driven by units outside IT Office.