Background
Cost optimization continues to be the primary driver for global outsourcing activity. That activity was quite robust in Q3, with a record $10.9 billion in annual contract value.
That said, savings generated by cost optimization-focused agreements are not from process improvements and labor arbitrage alone. They are increasingly also coming from transformation. For example, moving from a waterfall, on-premises infrastructure model to a modern DevOps, cloud-based model can significantly reduce the costs of operating the environment.
This means that enterprises are relying on their managed services providers to make big changes to their environment. And not just to the underlying technology, but to the operating model as well. These are enterprise-wide changes that often have very complex scopes and transitions.
The result of this is a boom in large-deal activity that often has
multiple towers in scope. All of these factors together are why deals are getting longer across the IT and business services industry (see Data Chart). It also represents a change from what we have seen over the last five to 10 years when deals were getting shorter.
The Details
