09 February 2018
Annual contract values of outsourcing deals (€billions) by type in EMEA for 2017. ITO outsourcing still dominates but IaaS is growing as is SaaS while business process outsourcing is starting to decline. SOURCE: EMEA ISG INDEX
The EMEA sourcing market rebounded in the final quarter of 2017, with double-digit growth in both traditional and as-a-service contracting values over the previous quarter, according to Information Services Group (ISG).
The technology research and advisory firm compiles a regular index measuring commercial outsourcing contracts with annual contract value (ACV) of €4m. Its index for Q4 2017 reveals the EMEA market, which fell sharply in Q3 after starting the year strongly, was up 27 per cent sequentially.
For the full year, EMEA generated €12.2bn in ACV, up three per cent against 2016. Traditional sourcing ACV of €8.3bn was down eight per cent, but as-a-service sourcing increased 41 per cent to €3.9bn.
ISG says this rise was driven by demand for IaaS. While SaaS ACV of €900m was flat for the year, IaaS ACV soared 58 per cent versus the prior year, reaching €3bn.
The firm says despite uncertainty around Brexit, the UK saw sourcing activity and ACV grow in 2017. This follows the broader trend of organisations entering into higher numbers of smaller-value contracts as they look to take a more “agile” approach to sourcing.
ISG adds that the 206 contracts and €3.2bn in ACV were both up 18 per cent year on year, albeit on a softer scale compared with 2016 which it describes as the UK’s “weakest” year in a decade.
All EMEA industry sectors showed growth in as-a-service ACV in 2017, with financial services dominating. Here, it hit €700m, a year-on-year increase of 40 per cent. The business services sector also recorded ACV of €700m and a 40 per cent increase compared with the prior year.
While the manufacturing sector saw a 50 per cent increase in as-a-service values, it was pulled down by a steep decline in traditional sourcing and fell overall by 21 per cent in 2017.
ISG adds that recent trends indicate significant spending on supply chain optimisation in manufacturing.
It believes connected devices supported by edge computing, IoT, and data analytics will increasingly become a major focus in the sector.
