15 May 2018
The EMEA sourcing market slumped in the first quarter of 2018, according to the latest data from the Information Services Group (ISG).
This is despite the region’s market seeing a rebound at the end of last year (see News, Jan 2018 issue).
ISG blames the decline on European enterprises focusing attention and discretionary spending on preparations for the GDPR which comes into force on 25 May.
The firm measures commercial outsourcing contracts with annual contract value (ACV) of €4m.
In its latest index, ISG reveals that EMEA’s first-quarter combined market ACV of €3bn was down 20 per cent compared with the same period last year. It says poor showings in Europe’s largest markets, the UK and DACH, were a “drag” on regional performance.
Although traditional sourcing ACV in the UK rose three per cent sequentially in the first quarter, ISG says it was down more than 60 per cent compared with the same period in 2017.
It adds that the number of contracts for the period held steady, although contract values were much smaller. 2018 yielded the lowest first-quarter ACV since 2010.
DACH had its third consecutive quarter of poor performance and its ACV of €438 million was its lowest quarterly total since the beginning of 2014.
The reduced appetite for traditional sourcing in DACH has been evident in each of the last three quarters, impacted by a shift in focus to GDPR and the implementation of new technologies.
“There is a degree of uncertainty in the European market that continues to depress demand for outsourcing,” says Steve Hall, partner and president, ISG EMEA.
“The focus on preparations for the sweeping GDPR data-privacy regulation and the impact this will have on business relationships is front of mind for many organisations and has led to a shift in priorities.”
Hall adds that the recent demise of UK construction firm Carillion and the financial uncertainty of some high-profile outsourcing companies has been extensively reported and has added a new degree of caution in the market.
While traditional sourcing stumbled, as-a-service soared, rising 40 per cent over last year.
As-a-service ACV of €1.4bn was the highest recorded in the region and represented 46 per cent of the combined regional market.
Looking at the remainder of the year, Hall says that while traditional sourcing may have a “bumpy” ride in coming quarters, the trend toward as-a-service will continue to accelerate across Europe through 2018.