Outsourcing in EMEA has plunged in the first quarter of 2018 as companies put their investment into GDPR. This is according to Information Services Group’s latest ISG Index, which has been tracking the health of the outsourcing industry for 15 years. The UK has been particularly hit, with news of failing high profile outsourcing companies and contract issues.
Key findings from the leading technology research and consulting firm include:
- Overall, contract values in EMEA fell 20% year-on-year, to €3bn, as European enterprises focused attention and discretionary spending on preparations for the EU’s General Data Protection Regulation.
- This was largely driven by the UK market, where the recent demise of Carillion and financial uncertainty of some high-profile outsourcing companies has been extensively reported and has added a new degree of caution in the market.
- Looking at the types of contracts being signed, Traditional Sourcing activities continue have less pull for businesses – contract values in this area dropped 40% compared to figures from 2017. Meanwhile, the As-a-Service market grew by 40%, as enterprises increasingly look to shift their operations onto the cloud.
While traditional sourcing stumbled, as-a-service soared, rising 40% over last year. As-a-service ACV (annual contract value) of €1.4bn was the highest recorded in the region and represented 46% of the combined regional market.
The increase in as-a-service sourcing was driven by demand for Infrastructure-as-a-Service (IaaS). Over the trailing 12 months, IaaS ACV increased 48% on the prior period and easily outpaced the 13% rise in Software-as-a-Service (SaaS).
Globally, the combined market reached a record high of €9.8bn in the first quarter of 2018, driven by 40 percent growth in the as-a-service sector, which reached €4.7bn of ACV. The new quarterly high for as-a-service is far beyond the €3bn - €3.5bn range in three of the last four quarters, and nearly double the typical ACV of just two years ago.
“There is a degree of uncertainty in the European market that continues to depress demand for outsourcing,” said 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 organizations and has led to a shift in priorities. The recent demise of 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.”
