Global spending on IT outsourcing rose dramatically in the 4th quarter of 2014 after six consecutive quarters of spending decline, according to a study by outsourcing research firm NelsonHall.
Bookings were up 50% in Q4, with investment in IT outsourcing increasing by 700% to US$5 billion in North America alone. Spending on IT services also increased by 2% in the quarter, driven mainly by increased investment in professional services, which expanded 3% in the quarter.
“Corporate clients are resuming their investments, awarding slightly higher scope ITO contracts as well as increasing somewhat their discretionary spending embedded into long-term contracts,” said Dominique Raviart, director ITO research at NelsonHall.
Nevertheless, the research firm forecasts that in 2015 worldwide IT services spending will increase by just 2.5% to 3.5%, with ITO spending growing in a range of 1% to 2%.
The sudden spurt in ITO spending in the 4th quarter was the result of the signing of some mega deals in the United States, but bookings throughout the entirety of 2014 fell to a historic low, below the level of 2013.
“Yet, a positive news is that the level of new scope contracts has somewhat improved. This together with the overall better economic forecasts in most countries suggests acceleration in ITO spending in 2015,” Raviart added.
While the sudden increase in ITO bookings in Q4 2014 looks impressive, it largely reflects a very low level of contract activity in Q4 2013.
“In fact, the level of bookings in Q4 2014 in the region is back to normal and does not reflect any major change in market dynamics,” NelsonHall noted.