The outsourcing market has had a stellar performance in the first quarter of 2016, with the volume and value of contracts growing by 32 percent and 20 percent respectively when compared to the same period of 2015.

The new data was released by the Information Services Group (ISG) yesterday, in its ISG Outsourcing Index. The Index takes into account commercial outsourcing contracts with an annual contract value (ACV) of £5m or more. The growth in outsourcing has been sustained by a steady growth in smaller deals and a record number of contract restructurings.

The total ACV for the global sourcing industry in the first quarter reached $6.1bn; however, the smaller contracts - those valued at less than $40m per year - grew at an astounding rate of 40 percent totalling $4.1bn. Contract restructures amounted to $2.8bn, a growth of 48 percent relative to the first quarter of last year.

Total contract volume reached 404 contracts, the second highest since ISG started the Index. Keeping with the trend of the past quarters, the volume of megadeals - those worth $100m or more - fell also, from seven in 2015 to five.

In the past 12 months, total ACV reached $24.3bn, and 1542 contracts worth $5m or more were signed globally.

Europe, the biggest outsourcing region, had a total ACV of $2.8bn, an increase of 19 percent from the previous quarter of the same year. Restructuring has been the biggest growth driver, having gone up 115 percent in value and 91 percent in volume. ITO and BPO were the best performing services.

The UK has seen moderate growth in the first quarter, especially when compared to the outstanding performance of the Nordic countries and Southern Europe.

Going forward, John Keppel, founder and president of the ISG, expects that the second quarter of the year will be more difficult, and advised that “for sustained market growth, the industry will need to continue seeing stepped-up activity in the smaller deal category”.

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