Global IT Services Hindered by The Cloud of Political Uncertainty

The pace of year-on-year revenue growth in the industry dropped to below 3% in the forth quarter of last year, with service buyers increasingly choosing in-house delivery over outsourcing.

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Political uncertainty in the United States, combined with the rise of disruptive technologies, has hit the global IT service outsourcing industry hard, according to the latest report from market research firm Everest Group.

The pace of year-on-year revenue growth in the industry dropped to below 3% in the forth quarter of last year, with service buyers increasingly choosing in-house delivery over outsourcing.Nexus 2017 Banner 4

The anemic growth will continue over next three years, reaching 1.9% by late 2019, the research firm has predicted.

Moreover, the sourcing industry is wondering how to deal with advancing technologies. The increasing utilization of IoT, automation, machine learning, and analytics have forced service providers to change their delivery models.

With the shortage of higher-skilled talent that possesses digital expertise, the technology service industry looks to be moving through a rough patch.

Last year, the share of digital services in outsourcing deals rose to 35%, with cloud, analytics, and mobility services leading the way.

Thanks largely to Brexit, outsourcing transactions in the United Kingdom reached three-year lows last year. Similarly, buyers in the United States are facing considerable uncertainty, as President Donald Trump is widely expected to restrict the H-1B visa program in his bid to create jobs for Americans.

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“Factoring in political uncertainties, the impact of technology, competitive drivers, and many other dynamics in the market, we believe that in the coming year enterprises will continue to leverage both in-house delivery and outsourcing,” said H. Karthik, partner, Global Sourcing, at Everest Group.

Last year, the sourcing activity was concentrated in the top-10 locations in offshore/nearshore countries. The research firm expects the trend to continue until tier two and tier three cities upgrade their infrastructure.

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