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The top 10 IT outsourcing service providers of the year — and the top 10 challengers

The top six outsourcers on Everest Group’s second annual ranking of the best IT service providers of the year remained unchanged since 2016 with Accenture taking the top stop for the second year in a row. But the real headliner may be Tata Consultancy Services (TCS), which has quietly built momentum in the market, leaping from fourth place to No. 2. TCS’s improved showing is primarily due to growth in key segments such as life science, infrastructure services, and capital markets, says Abhishek Singh, IT services practice director with Everest Group. “TCS stole the show by showcasing spikes in an otherwise flat growth market.”

Wipro also rose from fifth place to fourth thanks to the fact that Everest Group’s evaluations are based not only on capabilities but also vision, both of which the company has displayed in the realm of digital transformation. “Wipro’s investments in digital and IoT [internet of things] services have helped it chart out a favorable course for the future,” Singh says.

However, Accenture not surprisingly continues to outperform the field. “Accenture has been consistently upping the stakes for two years running,” says Singh. While most service providers seem to either focus on market growth or investment, Accenture has pursued both.

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Meanwhile, Cognizant dropped from the two spot to No. 3 and IBM fell to fifth place. However, “it’s not that Cognizant and IBM dropped their guard in any sense,” says Singh. “Both Cognizant and IBM continue to be strong leaders across many segments. Their drop in ranking was primarily because of TCS improving their momentum.”

Top 10 IT service providers of the year

  1. Accenture
  2. TCS
  3. Cognizant
  4. Wipro
  5. IBM
  6. HCL
  7. Infosys
  8. CapGemini
  9. DXC Technologies (merger of CSC and HPE)
  10. NTT Data

Credit: Everest Group 2018

Everest Group has been ranking service providers based on their performance in 26 categories, including key business lines, geographies, and technologies, and categorizing them as leaders, star performers, major contenders, or aspirants in each area. This is the third year the company consolidated that information for 73 providers to come up with overall rankings for the global outsourcing industry.

The majority of the top 20 list — 12 of them — are so-called Indian heritage firms. That’s due in part to the fact that multinational providers such as IBM, CSC-HP (now DXC Technologies), and CapGemini have a strong infrastructure outsourcing legacy that has been cannibalized by the cloud in recent years even after they had to reassess their applications business to compete with offshore rivals. As a result, those companies “witnessed slow growth and had to take a ‘back to the drawing board’ approach to strategy,” says Singh.

The Indian firms have faced challenges, too — seeing their double-digit growth numbers cut in half in many cases, but were less impacted than the older U.S. and European IT service providers. “The interesting thing to note is that the phase of transformation at firms such as IBM, DXC, and Atos appears to be coming to a logical end based on plans their board had laid out three to five years back,” says Singh. “It will be interesting to see how they change gears.”

It can be a challenge for large IT service providers — the multinational and Indian heritage firms alike — to stay nimble enough to innovate. And that is reflected in outsourcing customers’ chief complaints about the leading outsourcing providers. Everest Group published a report in 2017 that found that 48 percent of reference customers were unhappy with their providers ad outlined the biggest areas of customer dissatisfaction.

“Some key reasons that were cited by customers for this dissatisfaction were ‘idea to execution gap’, ‘bureaucracy in execution/enforcement of contracts’, and ‘not enough leadership attention’,” says Singh. “Not surprisingly, these are all vibes organizations send out when they become large. So, while digital investments, rebranding and fancy acquisitions were all good, on the ground execution was suffering.”

That is where smaller outsourcing providers can pounce and grab market share. This year for the first time, Everest Group created a ranking for what it calls IT services “challengers” — firms with less than US$2 billion in revenue who have shown significant momentum in growth. The top three were LTI, Virtusa and Syntel.

Top 10 IT service provider challengers of 2018

  1. LTI
  2. Virtusa
  3. Syntel
  4. Mphasis
  5. Hexaward
  6. Epam
  7. NIIT Technologies
  8. Luxoft
  9. Mindtree
  10. Zensar

Credit: Everest Group 2018

“It is a well-known fact that enterprises have always had a big-firm bias when it comes to sending RFPs and when thinking of vendor consolidation,” says Singh. “Challengers are firms who recognized this challenge and did two things: leveraged their smaller size (and lower burden of legacy) to become nimbler, creating strong focus on client intimacy and focused on their niche, whether it is capital markets, engineering services, or productivity.”

While the big guys are building new brands, these midsize firms are focused on execution. That’s leading to growth of 10 percent or more for the best among them and the winning or large deals they may not have even had a chance to compete for in a different era. “What these challengers have done is to create an opening for themselves,” Singh says. “Now that a number of them have grown over $1 billion in revenues, scale is not that big an issue. Enterprises have realized that excellence exists outside of the vendor groups they have traditionally engaged with; this is an interesting competitive twist to a market heavily leaning on buzzwords, which will bring some focus back on execution excellence in enterprise environments.”

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