03 November 2017
The value of ‘as-a-service’ sourcing contracts reached an all-time high in the EMEA region, but a drop in traditional sourcing resulted in a weak quarter overall, according to the Information Services Group (ISG).
In its quarterly review of the latest sourcing industry data and trends, the technology research and advisory firm measures commercial sector outsourcing deals with an annual contract value (ACV) of €4 million or more.
Its index for the third quarter shows the as-a-service sector continued its upward trajectory, rising 48 per cent to €1 billion, as companies continue to seek cloud and digital solutions to improve operating efficiency and develop new growth opportunities.
ISG says EMEA’s financial services sector posted strong gains in both traditional and as-a-service sourcing. Year to date, it has invested more than $2 billion in as-a-service technologies.
The midsize verticals of consumer packaged goods and business services also recorded double-digit gains in both traditional and as-a-service sourcing. However, the large verticals of manufacturing and telecoms stumbled.
ISG says the overall rise in the as-a-service sector helped counter the significant shortfall in traditional sourcing, which slumped 43 per cent to €1.3 billion, its lowest point in a decade.
It adds that the falloff in traditional sourcing – upon which EMEA depends more than other regions – caused combined ACV to drop 23 per cent to €2.3 billion, due in part to a lack of large contracts in the quarter.
Despite a weak third quarter, the index also reveals that the UK posted its strongest year-to-date performance since 2012. At €2.5 billion, the country’s ACV was up 15 per cent year-over-year, while the number of contracts rose 13 per cent in the same period.
ISG partner Barry Matthews says that despite a disappointing third quarter, the EMEA market year to date is showing modest growth, with record as-a-service contracting not quite able to counter the drop in traditional sourcing activity.
He adds: “Macroeconomic events in EMEA – the recent German election and continued uncertainty surrounding Brexit – continue to slow buying decisions.
“Nonetheless, as-a-service spending will continue to grow significantly through next year, as the imperative on businesses to find agile solutions to boost productivity and reduce costs continues.”