London, 20th February 2014 ― Information Services Group (ISG) (NASDAQ:III), a leading technology insights, market intelligence and advisory services company, has today issued research that shows the U.K. is the world’s leading user of multi-sourced outsourcing contracts, adopting the practice at a rate nearly four times that of the U.S.
Multi-sourcing is the growing global practice of outsourcing work to a number of more specialized service providers, rather than a single large provider. The approach is being adopted to varying degrees across different markets.
ISG’s analysis of outsourcing activity among G-2000 companies found that, in the U.K., nearly half (44 percent) of all outsourced functions are divided between at least five service providers. This is compared to a third (36 percent) of all contracts awarded in Australia and New Zealand, and just 12 percent of those in the U.S.
Just 6 percent of U.K. contracts are single source, while a further 22 percent follow the more traditional “Single Source 80” model – in which 80 percent of the outsourced function is held by one provider while the remaining, smaller portion is divided among other suppliers (see chart below).
Elsewhere in Europe, the Southern Europe region – which ISG defines as France, Spain, Portugal and Italy – also demonstrates enthusiasm for the multi-sourced model, with almost two thirds (56 percent) of contracts multi-sourced between two and four different service providers and a further 7 percent using five or more suppliers.
The Nordic region is following suit, with two thirds (65 percent) of all contracts now multi-sourced. Meanwhile the DACH countries (Germany, Austria and Switzerland) lag furthest behind their European counterparts, with just 40 percent of all contracts being multi-sourced.
John Keppel, partner and president, ISG North Europe, says: “We’ve been witnessing the phenomenon of increased deal fragmentation for quite some time now, but different markets exhibit varying appetites for this. Although multi-sourcing is a global phenomenon, the level of uptake differs across countries.
“More mature markets, like the U.S., have previously embraced multi-sourcing but realized it can be difficult to manage the numerous supplier relationships and have swung back towards a model with fewer providers. However, the U.K. is still clearly in the honeymoon phase and is employing more sophisticated management models, such as the Service Integration and Management (SIAM) method to maximize efficiency.”
The fourth-quarter 2013 Europe, Middle East & Africa (EMEA) ISG Outsourcing Index recently reported a trend toward increasing numbers of outsourcing contracts, but declining contract values. Despite the number of outsourcing contracts signed in the region rising by 18 percent during 2013, the collective value of these deals fell by 6 percent compared with 2012.
According to ISG, this trend of higher outsourcing contract volume at lower contract values is one result of the increased prevalence of multi-sourcing.
About the ISG Outsourcing Index
Now in its 45th consecutive quarter, the ISG Outsourcing Index provides a quarterly review of the latest sourcing industry data and trends for clients, service providers, analysts and the media. For more than a decade, it has been the authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider performance.
About Information Services Group
Information Services Group (ISG) (NASDAQ: III) is a leading technology insights, market intelligence and advisory services company, serving more than 500 clients around the world to help them achieve operational excellence. ISG supports private and public sector organizations to transform and optimize their operational environments through research, benchmarking, consulting and managed services, with a focus on information technology, business process transformation, program management services and enterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, the deepest data source in the industry, and more than five decades of experience of global leadership in information and advisory services. Based in Stamford, Conn., the company has more than 800 employees and operates in 21 countries.
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 The Forbes Global 2000 (G-2000) is an annual ranking of the top 2,000 public companies in the world by Forbes magazine.