The value of outsourcing contracts in the EMEA region rose 10% in 2019 says US-based Information Services Group (ISG).
The EMEA ISG Index, which measures commercial outsourcing contracts with annual contract value (ACV) of €5m or more, shows combined market ACV (including both as-a-service and managed services) in EMEA reached €17.1bn in 2019, fuelled by a notably strong second half. ACV in both Software-as-a-Service (SaaS) and Infrastructure-as-a-Service (IaaS) both hit record levels in 2019. The SaaS market climbed 13% with broad adoption of SaaS solutions across the region while the IaaS market grew 12%t.
Managed services ACV, at €10.7bn, rose 8% compared with the prior year, while as-a-service values set a new high of €6.4bn, an increase of 13%. As-a-service accounted for 37% of the EMEA market in 2019.
Managed services growth was driven by a rebound in business process outsourcing (BPO) ACV, which rose 61% compared with a much softer performance in 2018. Large contract awards and strength in facilities management and contact centre services boosted activity. By contrast, information technology outsourcing (ITO) ACV fell 3% as demand for infrastructure deals waned.
“The macroeconomic headwinds blowing across Europe have resulted in an acceleration, rather than a slowing, of the pace of digital change in the region,” said Steve Hall, president of ISG. “Digital has become the default position for enterprises in today’s technology-driven world. Enterprises are exploring options for cost savings and reinvesting those gains in technologies that will enable them to transform their customer experience and compete with upstart disruptors.”
Combined market ACV in the UK and Ireland rose 13% in 2019, reaching €5.5bn, its best year since 2012. Despite ongoing uncertainty over Brexit, clients are considering larger IT investments and focusing on digital transformation and the use of technology to drive productivity and improve customer experience.
Managed services ACV was up 15%, to €3.3bn, versus 2018. ITO values slipped 4% as gains in infrastructure awards were not enough to offset weakness in application development and maintenance (ADM) transactions. BPO ACV climbed markedly, up more than 50%, owing to strength in facilities management and industry-specific BPO.
As-a-service ACV exceeded €2bn for the second year in a row and now accounts for 40% of the combined market in the UK and Ireland. Both SaaS and IaaS reached new highs. SaaS rose 8% and IaaS 10% over 2018 totals.
Combined market ACV of €4.7bn in DACH was down 1% in 2019 in the face of economic unease, especially in the manufacturing and energy sectors. Despite the slight drop in ACV, 2019 was DACH’s second-best-ever performance as clients align their managed services strategies and digital investments.
DACH saw the highest growth in as-a-service contract value of all the major European markets, up 22% in 2019, to €1.8bn. As-a-service now comprises 38% of the combined market. With increases of 22% in both SaaS and IaaS, clients are continuing to move toward hybrid and multi-cloud environments.
Managed services ACV in DACH dropped 11%, to €2.9bn, as the number of contract awards fell to its lowest level since 2015. ITO ACV fell 25% on poor results in ADM and infrastructure. BPO ACV of €668M was significantly ahead of prior years, boosted by an increase in multi-function transactions and facilities management.
Combined market ACV in the Nordics set a record in 2019, rising 15% year-on-year to reach €2.1bn. The growth was supported by gains in both managed services and as-a-service values. Managed services ACV rose 17%, to €1.4bn, with strength in ADM transactions and infrastructure driving growth. BPO, though a smaller market, grew 20% due to strength across most functional areas. As-a-service ACV, up 12%, reached an all-time high of €735m, and now accounts for 35% of ACV in the Nordics’ combined market, up from 21% just three years ago.
Combined Market ACV in France reached €1.3bn, an increase of 15% over 2018 and its best result in the past five years. Growth was fuelled by increases in both managed services and as-a-service ACV. Managed services ACV reached its highest point in five years, up 23%, to €920m. Robust contracting activity led to a record number of awards, up 38% from 2018. ITO increased 34% for the period, lifted by infrastructure, which surged 47%, and applications, which grew 25%. The smaller BPO market declined
