Global technology research and advisory firm Information Services Group ("ISG") recently published its findings on the global outsourcing and "as-a-service" industry for commercial and public sector contracts for the first quarter of 2017.
The findings show that the combined traditional sourcing and as-a-service annual contract value (ACV) award for the commercial market in Europe, the Middle East and Asia (EMEA) reached € 3.5 billion in the first quarter (up more than 19% sequentially year on year) - the as-a-service ACV rising steadily as organisations increasingly embrace digital solutions (increasing by 48% compared to last year) and traditional sourcing also increasing with an ACV award of € 2.5 billion.
Traditional sourcing still far exceeds as-a-service contracts in EMEA. By comparison, in the Americas, traditional and as-a-service sourcing comprise equal shares of the market and in Asia Pacific, as-a-service sourcing is now approximately double the size of the traditional sourcing market.
In contrast to the commercial market, the public sector ACV in EMEA fell in the last twelve months – the € 6.3 billion of ACV awarded was down by almost half compared with the previous year, thought to be due to a slow-down in contracting brought about by political uncertainty across Europe. ISG suggests, however, that the public-sector market should return to its usual € 8 – 10 billion mark. Globally, ACV for the combined commercial and public sector market was € 18.7 billion for the first quarter of 2017 (up 15% from the fourth quarter of 2016).
The UK registered its highest ever ACV in a quarter for traditional sourcing, with € 1.4 billion awarded for the first quarter of 2017 and thought to be due in part to the award of four particularly large outsourcings. This follows three consecutive weak quarters in the sourcing sector attributed to political and technological uncertainty following the UK's vote to leave the EEA in June of last year.
Looking at industry sector breakdown, the figures reveal a more varied picture. The financial services sector saw "robust growth" over the last 12 months (particularly in the as-a-service market with banks and insurers embracing new technologies to take advantage of cost reductions). The business services sector also performed well, with an ACV of just over € 1 billion in the last 12 months and as-a-service accounting for more than half of that figure, indicating rapid adoption of cloud-based solutions. ACV in the manufacturing sector fell by 37% in the last 12 months.
The growth trends seem set to continue as John Keppel, partner and president of ISG, reflected on the "EMEA market showing strength in both traditional sourcing and as-a-service contracting" and suggesting "we expect high single-digit gains in the EMEA market for the rest of 2017.
Click here for the ISG Index – EMEA Combined Sourcing and As-a-Service Market Insights and here for the related ISG press release.
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