Industry news

Global demand for technology and business services continues to accelerate, with as-a-service contract value climbing to another record high in the second quarter and traditional sourcing value reaching $7 billion for only the fifth time in history, according to the latest state-of-the-industry report from Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

Data from the ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, show second-quarter ACV for the combined global market (including both as-a-service and traditional sourcing) surged 31 percent, to a record $12.4 billion. That figure includes traditional sourcing ACV of $7 billion, up 19 percent, and record as-a-service ACV of $5.4 billion, up 51 percent and nearly double that of two years ago. It was the first time as-a-service ACV surpassed $5 billion in a quarter.

The continuing surge in as-a-service value was fueled this quarter by a 58 percent increase in Infrastructure-as-a-Service (IaaS), to $3.9 billion, and a 35 percent increase in Software-as-a-Service, to $1.5 billion, as enterprises continue to move more workloads to the cloud.

"Global demand for outsourced IT and business services continues to expand, helped by robust economic trends and an unrelenting enterprise focus on all things digital," said Steve Hall, partner and president of ISG. "There were some initial concerns the as-a-service revolution would eat away at the market for traditional sourcing services, but that hasn't been the case. The combined global market is actually getting bigger, with steady quarter-over-quarter ACV growth during the last year bringing us to this new high-water mark. We're in a very strong, sustained market right now."

For the first half, global combined ACV reached an all-time high of $23.6 billion, up 17 percent over the same period last year. Growth was paced by record as-a-service ACV of $10.1 billion, up 39 percent. Traditional sourcing ACV was up 5 percent, to $13.5 billon, on record volume of 946 contracts. Most (61 percent) were smaller contracts – in the $5 million to $10 million range – up 17 percent over the prior-year period.

In the first half, financial services remained the largest global market for combined sourcing services, with ACV of $5.5 billion (up 28 percent), followed by business services, with ACV of $3.8 billion (up 30 percent), and manufacturing, with ACV of $3.1 billion (down 7.5 percent). The fastest-growing sector was healthcare and pharma, which saw its ACV climb 58.3 percent, to $2.5 billion. Retail was the second-fastest-growing sector, with ACV of $1.6 billion, up 57.9 percent.

Americas

The Americas, the world's largest combined sourcing market, generated combined ACV of $5.9 billion in the second quarter, up 33 percent. Traditional sourcing, at $3.1 billion, was up 25 percent, continuing a record string of four straight quarters above the $3 billion mark. Growth was fueled by applications outsourcing and industry-specific business process outsourcing. Meanwhile, records abound in the as-a-service space. As-a-service sourcing reached a record $2.8 billion, up 44 percent, and its share of combined-market ACV climbed to 48 percent, a new high. The two components of as-a-service – IaaS ($1.87 billion, up 50 percent) and SaaS ($951 million, up 32 percent) – both established new quarterly highs.

Europe, Middle East and Africa (EMEA)

The EMEA market rebounded from a soft first quarter to post combined second-quarter ACV of $4.6 billion, up 23 percent over the prior year. Traditional sourcing, which continues to represent the lion's share of the overall market, advanced 11 percent, to $3.1 billion, showing strength in the UK, the Nordics and Southern Europe. It was the first time traditional sourcing ACV topped the $3 billion level in the last 18 months. Although as-a-service represented only a third of the region's combined sourcing market, it was its fastest-growing segment, up 56 percent, to $1.5 billion, with both the IaaS and SaaS portions reaching record highs and contributing equally to the growth.

Asia Pacific

Asia Pacific's combined ACV rose 44 percent, to $1.9 billion, the best such total since ISG introduced this metric in 2016. The as-a-service market broke through the $1 billion level for the first time, with ACV of $1.1 billion, up 65 percent, the fastest growth of any region. Traditional sourcing, meanwhile, turned in its best quarter in four years, with ACV of $865 million, up 25 percent. Growth was paced by the banking, financial services and insurance sector and the transportation industry, application maintenance and design (ADM) services, and the Australia/New Zealand and North Asia markets.

Forecast

"The growth of public cloud is accelerating; we now expect growth to exceed 45 percent for the full year, contributing to the 30 percent growth we are forecasting for IaaS overall," said Hall. "We are also increasing our growth forecast for SaaS to 16 percent, up slightly from the 15 percent we forecast in April. We're also more bullish on traditional sourcing, raising our growth forecast for the year to 4.4 percent, up from 2 percent in April."

About the ISG Index™

Now in its 63rd consecutive quarter, the ISG Index™ provides a quarterly review of the latest sourcing industry data and trends for clients, providers, analysts and the media. For more than 15 years, it has been the authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider performance. In 2016, the ISG Index™ was expanded to include coverage of the fast-growing as-a-service market, measuring the significant impact cloud-based services are having on digital business transformation. ISG also provides ongoing analysis of automation and other digital technologies in its quarterly ISG Index™ presentations.

The 2Q 2018 ISG Index™ was presented during a conference call and webcast for media and analysts today. To listen to an audio replay of the call and view presentation slides, please visit http://www.isg-one.com/research/research-detail-page/isg-index.

About ISG

ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 700 clients, including 75 of the top 100 enterprises in the world, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; technology strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,300 professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry's most comprehensive marketplace data. For more information, visit www.isg-one.com.

• Arvato CRM named as a Leader in latest Everest Group PEAK Matrix™

• Customer service provider recognized for its ability to cater to the evolving customer service needs of clients

• Investments in digital and artificial intelligence noted for providing the company with a competitive advantage

Arvato CRM Solutions has been named as a Leader for the second consecutive year, in an in-depth report from research and consulting firm Everest Group.

The global customer service provider was recognized for the consistency and flexibility of its service, and its ongoing success in expanding its portfolio of clients in high-growth areas such as retail and technology.

Arvato CRM’s ability to constantly adapt to the changing customer services needs of its clients was also highlighted in the report, as this has enabled the company to offer them a seamless omnichannel experience.

Ongoing investment in its digital and analytical capabilities also contributed towards Arvato CRM’s high ranking, with the development of technology, such as its conversational AI platform, giving the provider an advantage over its competitors.

Everest Group’s annual report, named the Contact Center Outsourcing (CCO) Service Provider Landscape with PEAK Matrix™ Assessment 2018, ranked 36 companies on their market impact, vision and capabilities. Arvato CRM ranked amongst just nine providers that Everest Group recognized as Leaders.

Andreas Krohn, CEO at Arvato CRM, said: “Arvato’s greatest strengths are in our ability to develop innovative solutions that are powered by both human and artificial intelligence.

“This means we can optimize customer service interactions and enable brands to stay ahead in a constantly evolving market.

“Being ranked as a leader by Everest Group is testament to our flexible approach to meeting client and industry needs.”

Skand Bhargava, Practice Director for Business Process Services at Everest Group, said: “Arvato has established itself as a leader in the CCO market with its flexibility to meet fast changing customer experience demand, delivering a seamless service and satisfaction – for both customers and brands – across multiple channels.”

ENDS

About the PEAK Matrix™

The Everest Group PEAK Matrix™ is a proprietary framework for assessing the relative market success and overall capability of service providers based on Performance, Experiences, Ability and Knowledge. Each service provider is comparatively assessed on two dimensions: market success and delivery capabilities. The resulting matrix categorizes service providers as Leaders, Major Contenders, and Aspirants. Companies that demonstrate strong upward movement in successive reports are recognized as Star Performers. Everest Group recently announced a recalibrated methodology, in which innovation, intellectual property and technology take center stage.

About Arvato CRM Solutions

We design, deliver and differentiate customer service on behalf of some of the world’s most respected brands. Arvato CRM Solutions has approximately 45,000 people at more than 100 customer service centers in 27 countries speaking 35 languages and is recognized as a ‘clear leader’ in the global customer services/customer experience (CX) sector1. It is a part of Arvato, the world’s third largest business process outsourcing (BPO) provider2 that provides customer services, supply chain solutions, financial services, and IT solutions, and has total revenues of €3.8 billion. 3 Arvato is a division of Bertelsmann.

1CCO – Service Provider Landscape with PEAK Matrix™ Assessment 2017 by Everest Group June 2017. 2’HfS BPO Top 50’ by HfS Research July 2017; 3 2016.

The company recently signed multiple new clients across the technology and manufacturing industries. TTEC also added 50 new employees to its Sofia location providing multi-lingual on-Call support with SLA compliance, service desk response, customer care and growth services across nine languages, including English, Danish, Finnish, German, Italian, Portuguese, Spanish, Japanese and Russian. A successful Q1 2018 for TTEC in EMEA was concluded with news of being shortlisted as a finalist for the Best Nearshore Team Award at the Global Sourcing Association (GSA) Professional Awards. This industry association and professional body for the global sourcing industry serves to share best practice, trends and connections across the globe through the annual awards program recognising service excellence.

“As an industry innovator and leader within the customer experience industry, it’s great to receive recognition that reflects our strong customer and partner relationships,” said Iain Banks, VP of International Markets, TTEC. “We have tremendous momentum at present, evidenced by our new client programs and team growth, strengthening our footprint in Europe and our leadership in transformative customer experience and engagement solutions.”

The company also confirmed three key appointments of seasoned industry players for Business Development, Solutions and Human Capital roles in the region.

• Nameer Rattansi joins TTEC as Head of Solutions EMEA. With over 15 years of experience leading customer care services and support for global brands, Rattansi will expand his solution consulting leadership and project manage cross-functional CX teams throughout the sales cycle to conclusion on UK, pan-EMEA and global offshore deals.

• An influential leader, Joanne Regan-Iles joins as Head of Human Capital EMEA where she will spearhead TTEC’s talent acquisition and human capital strategy. With 14 years of experience in leading Human Capital teams, Regan-Iles will be responsible for continued efforts in hiring, retaining and developing world-class people that serve as brand ambassadors for TTEC clients.

• Clare Lomax, VP Sales for EMEA, will be responsible for accelerating the company’s regional go-to-market strategies and local market expansion. With an impressive track record of personally winning more than £1B of outsourcing contracts globally, Lomax is a motivated professional with 25 years of experience in strategic outsourcing sales.

For more information on how TTEC is driving digital transformation and omnichannel customer experiences in EMEA, visit www.ttec.com/emea/

About TTEC:

TTEC (NASDAQ: TTEC) is a leading global customer experience technology and services provider focused exclusively on the design, implementation and delivery of transformative solutions for many of the world's most iconic and disruptive brands. The Company delivers outcome-based customer engagement solutions through TTEC Digital, its digital consultancy that designs and builds human centric, tech-enabled, insight-driven customer experience solutions for clients and TTEC Engage, its delivery centre of excellence, that operates customer acquisition, care, growth and digital trust and safety services. Founded in 1982, the Company's 50,500 employees operate on six continents across the globe and live by a set of customer-focused values that guide relationships with clients, their customers, and each other. To learn more about how TTEC is bringing humanity to the customer experience, visit www.ttec.com.

The cyber threat landscape can be a bemusing place for a business executive. A fast-moving, jargon-filled world of shadowy hackers, nation-state spies and bedroom-bound hacktivists, cyber is nonetheless a vital contributor to business risk. As such, whether you’re a global sourcing buyer or supplier, you must be able to understand where the online threats to your business lie, how they might impact risk, and how you can mitigate that risk.

The chances are you’re familiar by now with ransomware. Well, increasingly, the hackers are eschewing this money-making scheme in favour of another, far more insidious and covert strategy: mining crypto-currency using your own enterprise computing resources. It’s time to get familiar with a new trend in cybercrime: crypto-jacking.

Mining for money

Like every new cybercrime story, this one is based on a simple financial narrative. Unless they’re sponsored by nation states, or driven by notoriety or revenge, hackers will always go where the money is. And today there is a lot of it to be had from the burgeoning crypto-currency markets. The astronomical rise in value of digital currencies like Bitcoin, Monero, Ripple and Ethereum over the past year or so has led to a kind of modern-day gold rush, with technology at its heart.

There are various legitimate ways to make money from crypto-currencies — perhaps by investing in and trading Bitcoin, for example. One other way is to “mine” currencies. Crypto-mining is carried out today by computers which make complex calculations to ensure virtual transactions are entered onto the public blockchain-based ledger. In return for their efforts, the owners of these machines are rewarded with a small amount of virtual currency.

As the finite number of Bitcoins etc left to mine slowly reduces, these calculations get more difficult and require more and more electricity to power. It’s said that the energy used to power global Bitcoin mining efforts alone is equivalent to that of a small country: around 30 TWh per year.

Now this is where the hackers come in. They’ve found that by hijacking large numbers of consumer and business machines, they can tap the collective computing power to mine their own virtual coins. Mobile devices, PCs, Macs, servers, IoT endpoints: no internet-connected system is safe from this emerging crypto-jacking menace.

It’s claimed that crypto-jacking attacks soared by a staggering 8,500% in 2017. More recent stats have the number of malware detections in businesses increasing by a more modest 27% from Q4 2017 to Q1 2018. At NTT Security, we’ve also noticed a spike in activity in recent months. After collecting 12,000 samples of Monero mining malware dating back to March 2015, we discovered the vast majority (66%) dated from November and December 2017.

Firms under fire

With some security researchers claiming that hackers could make as much as $100m per year, it’s no surprise why this new trend has become so popular among the black hats. It’s much easier for them to run these botnets of compromised machines than it is to co-ordinate a ransomware campaign, for example, which requires interaction with the victim and the possibility of not being paid. With crypto-jacking, you simply infect a bunch of computers, sit back and let the money start flowing in.

The bad news, however, is that they’re increasingly likely to target business computer systems to assist in their covert mining activity, as there’s more computing power to hijack than consumer devices can offer. Crypto-mining malware affected 42% of organisations globally in February 2018, according to one vendor.

Contrary to popular belief, the potential impact on businesses extends beyond the costs associated with extra electricity usage. Crypto-jacking could also impair the performance of your systems, leading to wear and tear and potential downtime that could affect customer service and staff productivity. Infection could also be both indicative of deeper security problems in your networks and lead to additional cyber-attacks designed to spread ransomware, or harvest sensitive IP and customer data. One report claimed that of 4,000 Bitcoin mining detections spotted in 1H 2017, 20% triggered web and network-based attacks.

How to fight back

As long as there’s a financial incentive to do so, and corporate systems are exposed to attack, cyber-criminals will continue to target them with crypto-mining malware. So where are the key risks for global sourcing buyers and suppliers? NTT Security research indicates that malicious email campaigns are the primary means via which hackers are likely to access your systems. This can be difficult to defend against, as the tactic takes advantage of the credulity of your users to trick them into clicking on a malicious link or opening a malware-laden attachment. With Verizon claiming that 4% of users targeted by any given phishing campaign click through, improved security training is an essential complement to investments in security technology.

It’s not all about malicious email, however. The National Cyber Security Centre has warned in a new report that a new tactic could dominate over the coming year. “Popular websites are likely to continue to be targets for compromise, serving crypto-mining malware to visitors, and software is available that, when run in a webpage, uses the visiting computer's spare computer processing power to mine the digital currency Monero,” it claimed. Such an attack was spotted in February, with legitimate tool Coinhive found to be running on 4,000 websites including those of the Information Commissioner’s Office, United States Courts, and the General Medical Council.

So how can global sourcing stakeholders hope to mitigate this new cyber-risk? It will require a layered approach to security focused on people, process and technology and comprising best practices of the sort outlined by the NCSC. On the technology side this means investments in IDS/IPS, network monitoring, ad blocking, anti-malware and more. Combine this with regular risk assessments, user education and comprehensive patch management, and you’ll stand a good chance of success.

Cybersecurity is ultimately about making you a harder target. With crypto-jacking, the hackers are looking for the path of least resistance, so put enough barriers in the way and they’re likely to look for easier targets.

(Click here for the full NTT Security report...)

About the Author

Terrance DeJesus is a Threat Research Analyst at NTT Security.

A third of UK workers believe that their jobs will be automated within the next decade – and almost ten per cent think it’s likely to happen within two years - according to research by payroll firm ADP – and of those, over half think their employers are not doing enough to reskill them ahead of time.

Fears over automation are distributed unevenly amongst different demographics, according to the research cited by The Independent newspaper and others: just under 50% of employees aged between 16 and 35 see their jobs falling to automation within ten years, whilst workers in London are more fearful than those anywhere else: 46% of those surveyed in the capital worry about losing their jobs to automation over the next decade.

“Automation may seem like an issue for future generations, but our findings show that machines could replace thousands of employees in as few as five years… By starting to upskill and retrain workers now, employers can ensure they and their employees are as ready as possible to work side-by-side with the machines,” Jeff Phipps, managing director at ADP UK, told The Independent.

The global business process outsourcing (BPO) industry added fewer jobs last year than at any time since 2010, according to a report by India’s outsourcing trade body Nasscom. Net job growth in the $28bn BPO exports business stood at 36,000, with a global total in the region of 1.2 million, according to the Nasscom study. The annual average since 2011 has been in excess of 50,000 net new jobs.

While hiring growth has slowed, however, revenues are still strong, indicating that the shift to more automated work is accelerating. Earlier this year Cognizant became the first outsourcing major to hit 10% annualised growth whilst decreasing headcount, and several other leading players are expected to follow suit when their results are announced this month.

“This is, absolutely, not just a sign of things to come but of things that are already here,” said Jamie Liddell, Head of Content for the Global Sourcing Association (GSA). “Outsourcers of all shapes and sizes are scrambling to leverage the full power of automation and AI as quickly as possible to move away from the FTE-based model on which they’ve relied for many years. I’d be very surprised if we don’t see negative job growth this time next year, while revenues continue to rise.”

The Trades Union Congress (TUC) has called for a “beefing up” of labour laws affecting employees of outsourcing firms, saying that current legislation is insufficient to support subcontracted workers. The organisation has suggested that the government bring in legislation to allow such workers to challenge their “parent companies” to ensure full access to benefits such as holiday pay and even the national minimum wage.

According to TUC estimates, up to five million workers – 3.3 million employed through outsourced providers, at least 1 million by recruitment agencies and similar firms, and 615,000 by franchised operations - in the UK cannot enforce their basic rights.

TUC general secretary Frances O’Grady said: “This is an issue that affects millions, from fast food workers to people working on building sites. Employers have a duty of care to workers in their supply chains. They shouldn’t be allowed to wash their hands of their responsibilities… Joint liability must be extended to parent employers. Without it they can shrug their shoulders over minimum wage and holiday pay abuses… Our labour enforcement laws urgently need beefing up.”

A spokesperson for the Department for Business, Energy and Industrial Strategy said: “The government recently set out plans to ensure millions of workers, including agency workers, will benefit from enhanced rights and protections. We are also considering repealing laws allowing agencies to employ workers on cheaper rates.”

A report by the OECD on the impact of artificial intelligence and automation suggests many fewer jobs in the UK and USA will be lost than previously thought – though the revised figures still represent many millions of positions at risk.

According to the report, some 10% of US jobs and 12% of UK roles will be lost to automation over the next decade – significantly lower than the 47% and 35% respectively predicted by a highly influential Oxford University study released in 2013. Nevertheless, the figure for the UK represents around three million employees, and that for the USA at least 13 million, the report claims.

The research suggests that while fears of the impact of automation and AI have been to some extent overblown, the consequences will still be significant, with “further polarisation of the labour market” potentially leading to greater wealth inequality, and with countries not sufficiently prepared for the retraining burden which will result from such widespread job losses.

“The large share of workers whose jobs are likely to change quite significantly as a result of automation calls for countries to strengthen their adult learning policies to prepare their workforce for the changes in job requirements they are likely to face,” the report warns.

A report by the OECD on the impact of artificial intelligence and automation suggests many fewer jobs in the UK and USA will be lost than previously thought – though the revised figures still represent many millions of positions at risk.

According to the report, some 10% of US jobs and 12% of UK roles will be lost to automation over the next decade – significantly lower than the 47% and 35% respectively predicted by a highly influential Oxford University study released in 2013. Nevertheless, the figure for the UK represents around three million employees, and that for the USA at least 13 million, the report claims.

The research suggests that while fears of the impact of automation and AI have been to some extent overblown, the consequences will still be significant, with “further polarisation of the labour market” potentially leading to greater wealth inequality, and with countries not sufficiently prepared for the retraining burden which will result from such widespread job losses.

“The large share of workers whose jobs are likely to change quite significantly as a result of automation calls for countries to strengthen their adult learning policies to prepare their workforce for the changes in job requirements they are likely to face,” the report warns.

LONDON, 28/3/18: The Global Sourcing Association (GSA), the industry association for strategic sourcing and outsourcing professionals, has launched its new #ReshapingOutsourcing campaign intended to improve and futureproof the outsourcing model. At an extraordinary meeting held in London on March 26th, over 80 senior professionals from across the industry convened to discuss the challenges facing outsourcing – including a welter of media and political criticism, a wave of disruptive technologies and the emergence of new partnership and contractual models – and possible solutions designed to improve service quality and outcomes and to shore up the reputation of this critical sector.

Prior to the event, a GSA survey of the community showed that over 80% of respondents desired change in the industry (with only six per cent believing no change at all is necessary), and breakout sessions on Monday showed a clear desire for fundamental improvements in areas as diverse as communications, hiring, public relations, upskilling sourcing professionals, preparing for the future working landscape and more.

The discussions generated at the event will now be used as the basis for working groups, to meet regularly over the course of the next few months, designed to formulate a series of actions which will combine to form a coherent programme of work to be unveiled at the GSA UK Symposium & Awards, to be held in London on November 22, 2018. Kerry Hallard also informed the conference of a range of new GSA activities to run alongside these working groups under the broad remit of ‘Reshaping Outsourcing’, as well as an expansion of the GSA’s workshop programme to provide an immediate boost to the upskilling imperative expressed by the group.

“This industry is on a burning platform,” Hallard said. “Don’t get me wrong – in most cases outsourcing works – but we seem too unwilling to share those successes. I propose that we come together as an industry like never before, to celebrate our successes, acknowledge our shortcomings, agree that we want to make some changes – and agree what those changes are, and develop and deliver a targeted plan.”

The GSA is now calling for members of the strategic sourcing and outsourcing space who were unable to attend Monday’s meeting to throw their support behind the campaign, including by joining the nascent working groups to help shape the future of the industry. Those interested should contact Kerry Hallard, CEO, GSA UK, at kerryh@gsa-uk.com or on +44 (0)7774 690447.

For more information on the GSA UK Symposium & Awards 2018, see https://www.gsauksymposium.com/ or contact Natalie Milsom at nataliem@gsa-uk.com or on +44 (0)7817 040202.

For information on the GSA’s workshop programme – including forthcoming sessions on design thinking and intelligent automation – please contact Debbie Mackay at debbiem@gsa-uk.com or on +44 (0)7398 262548.

About the GSA:

The Global Sourcing Association is the industry association and professional body for the global sourcing industry, and the home of the Global Sourcing Standard, a world first for the provision of a portfolio of best practice methodologies and accreditation programmes supported by both buyers and suppliers of sourcing. The GSA is a not-for-profit membership association with fully licensed, affiliate and associate members, and serves to share best practice, trends and connections across the globe. The Global Sourcing Association has a presence across the globe and provides guidance in economies such as the United Kingdom, France, Germany, Italy, Belgium, the Netherlands, Spain, Norway, Poland, Romania, Bulgaria, Russia, Egypt, China, India and the United States.