EMEA Outsourcing Returning to Pre-2015 Levels

ISG Index

Region's managed services ACV exceeds €2.7 billion for second straight quarter, three of last five, signaling return to pre-2015 spending levels;

As-a-service ACV up 17% in half, now accounts for record share of region's combined market;

'Uncertainty becomes the new normal,' as U.K. and DACH remain flat; first-half growth spurred by Nordics, Benelux and Southern Europe

LONDON, July 18, 2019 /PRNewswire/ -- The value of Europe's managed services contracts in the second quarter exceeded €2.7 billion (£2.4 billion) for the second quarter running, indicating a potential return to pre-2015 spending levels, according to the latest state-of-the-industry report from Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The EMEA ISG Index, which measures commercial outsourcing contracts with annual contract value (ACV) of €4 million or more, shows the region's combined first-half ACV, including both managed services and as-a-service contracts, was up 12 percent, to €8.9 billion.

Managed services, with two straight quarters exceeding €2.7 billion in ACV, reached €5.7 billion in the first half, up 10 percent against the softer 2018 period. Within managed services, IT outsourcing (ITO) rose 12 percent, to €4.7 billion, while business process outsourcing (BPO) was up 1 percent, to €1.0 billion. The second quarter was the third quarter in the last five that managed services ACV exceeded €2.7 billion.

With continuing strong demand for cloud-based solutions, as-a-service ACV climbed 17 percent, to €3.2 billion, in the half. Infrastructure-as-a-Service (IaaS) surged 19 percent, to €2.4 billion, while Software-as-a-Service (SaaS) rose 9 percent, to €846 million.

Growing demand for as-a-service solutions shows no signs of abating, with these solutions now accounting for 36 percent of combined market spending. In the second quarter, as-a-service reached €1.6 billion, up 9 percent. IaaS, which is becoming the digital foundation for businesses (and has tripled in growth since 2016), reached €1.1 billion in the quarter, up 7 percent. Software-as-a-Service, up 16 percent, reached a quarterly record of €437 million.

Managed services ACV, meanwhile, dropped 1 percent in the second quarter, to €2.9 billion, but the number of contract awards reached 204, up 10 percent over the prior year, only the third time in the history of the ISG Index the region surpassed the 200-award level in a quarter. ITO was up 2 percent, but BPO slumped 14 percent.