Outsourcing in Europe, Middle East and Africa reaches four-year high
Mega relationships prompt best first quarter for EMEA since 2010, according to research
Outsourcing activity in Europe, the Middle East and Africa (EMEA) has had its best start in four years, with both contract value and counts up by double digits.
So claims research by the Information Services Group (ISG), which found that annual contract value across the region came to €2.4 billion, an increase of 10 per cent compared with the previous quarter and 29 per cent year-on-year.
The UK continued its strong showing, with ACV of just over €1 billion awarded, a quarter-on-quarter increase of 33 per cent and up 66 per cent year-on-year. The 59 contracts recorded of that nature marks the highest number of contract awards in a quarter over the last three years.
Multi-sourcing, increasing competition among providers and lower technology costs will continue to be the factors that drive the market for the foreseeable future
Growth was largely supported by five mega relationships – contracts valued at more than €80 million – signed in the region this quarter, including contracts in the UK, France and the Nordics. This was a marked increase from two such deals in each of the first and fourth quarters of 2013.
The 165 contracts awarded in the region in the first quarter represented a 21 per cent rise year-on-year. With more than 50 per cent of all global outsourcing activity concentrated in EMEA, both by ACV and contract counts, the region continues to dominate outsourcing activity in the global market.
The majority of contracts awarded in EMEA were new in scope, accounting for 76 per cent of all contract value in the region, an increase of 48 per cent year-on-year and the highest quarterly value in four years. Conversely, restructuring values fell by one third both quarter-on-quarter and year-on-year.
The IT Outsourcing market (ITO) continued to dominate the EMEA market. The €2 billion of ITO ACV awarded in the first quarter was up 18 per cent quarter-on-quarter, and accounted for a full 85 per cent of the overall EMEA market. The 127 ITO contracts signed during this period was the region’s highest number ever recorded in a single quarter.
By contrast, the Business Process Outsourcing (BPO) market declined for the third successive quarter, with modest values recorded in ACV (€370 million) and contract counts (38).
“The EMEA market has had a strong start in 2014. Activity levels in the region remain high and the return of mega-relationship awards in the quarter boosted the market values," said John Keppel, partner and president, ISG North Europe.
“Although these larger contracts have a strong role to play in the market, the smaller deal size brackets will continue to grow more sharply as enterprises opt for greater flexibility and more specialized services from a greater number of providers. Multi-sourcing, increasing competition among providers and lower technology costs will continue to be the factors that drive the market for the foreseeable future.”