Major IT outsourcing acquisition will have mixed impact

Information Service Group’s purchase of competitor Alsbridge creates a larger, more well-rounded outsourcing advisory, but will also reduce competitive pricing leverage for clients.

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The announcement that outsourcing consultancy Information Services Group (ISG) will acquire competitor Alsbridge marked the biggest M&A announcement in the IT services advisory industry since KPMG bought EquaTerra in 2011. The two large independent outsourcing advisors are joining forces to create a 1,300-person firm with offices in 20 countries revenues targeted at between $285 and $300 million in 2017.

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The combined firm, with its expanded services, data and market intelligence, could put pressure on the big consultancies who offer IT outsourcing advisory services. “ISG's principle competitors — KPMG. Deloitte, EY and PwC — now have a bigger, badder ISG to contend with that can not only undercut them on fees but also can boast competencies in the emerging area of RPA, where the Big Four are currently winning out,” HfS Research CEO Phil Fersht recently wrote in a blog.

The upside and the downside of an ISG Alsbridge merger

But, more importantly, the joining up of these two major players will have an impact on buyers of IT outsourcing advisor services. On the plus side are those additional competencies ISG brings on board with its purchase of Alsbridge. “

“The combined capabilities of ISG and Alsbridge are formidable,” says Lee Coulter, senior vice president of Ascension and CEO of their shared services subsidiary “This deal adds a strong BPO and growing automation services capability to ISG. I think it is a good fit operationally and geographically.” ISG had made several smaller acquisitions over the last six years as well. “For loyal clients of both ISG and Alsbridge,” says Fersht, “most will have a larger pool of talent to help them. “

然而,缺点是,此次合并将删除one of the only remaining large competitors from the IT outsourcing advisory landscape, eliminating some competitive pricing pressure from the market. “Those who loved to trade off ISG and Alsbridge to get their fees lowered will have to resort to really small firms like Avasant and Aecus as alternatives, who are good at some things, but will often struggle to scale up to meet client needs,” Fersht says.

The new ISG will serve more than 700 clients, including 75 of the 100 largest enterprises in the world. Efficiencies gained by combining the two firms will produce an estimated $7 million in cost savings in the first 18 months, according to ISG. Some new or bolstered services that Alsbridge will bring include telecommunication sourcing, audit, and transformation services and robotic process automation (RPA) assessment and implementation. Of course, the larger firm will also continue to advise on outsourcing deals; ISG and Alsbridge are currentlyinvolved in approximation $18 billion of transactions globally.

IT and business service advisors will remain important to enterprises for some time, says Coulter. “As integrated IT and business services offerings become mainstream, companies are going to continue to need advisory to help them navigate the complexities of complex business services relationships,” he says. “The advisors will need to focus on growing their capabilities into helping organizations do the business process transformations necessary to take advantage of new super nimble cloud based business services. To continue to thrive, advisors will have to be competent across technology, security, business process and process automation and transformation.”

Expertise in areas like automation and cognitive computing, in addition to deal brokering competence, will be critical going forward, says Fersht. “Also, advisors need to support clients with more innovative firms of pricing, such as outcome-based initiatives.”

This story, "Major IT outsourcing acquisition will have mixed impact" was originally published byCIO .

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