Cloud spending soars at IT outsourcing's expense

The UK's cloud and traditional sourcing revenues were higher than they have been over the last five years

While interest in and adoption of cloud technologies and services is growing, it's having a knock-on, negative impact on the traditional outsourcing market, according to research. 

ISG's EMEA Index revealed that cloud technologies, including SaaS, IaaS and PaaS soared by 48% to become worth more than 1 billion (890 million) over the last 12 months, while traditional outsourcing decreased by almost as much - 43% - in the same period.

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At a worth of just 1.3 billion (1.16billion), this is the lowest the traditional outsourcing market has been for ten years.

The UK put up one of the strongest fights though, performing better than it has done over the last five years with an annual contract value (ACV) of 2.5 billion - taking a big chunk of the region's combined 9 billion. This represents year-on-year growth of 15%, with the number of contracts increasing by 13%.

"Despite a disappointing third quarter, the EMEA market year to date is showing modest growth, with record as-a-service contracting not quite able to counter the drop in traditional sourcing activity," said Barry Matthews, partner at ISG.

"Macroeconomic events in EMEA the recent German election and continued uncertainty surrounding Brexit continue to slow buying decisions. Nonetheless, as-a-service spending will continue to grow significantly through next year, as the imperative on businesses to find agile solutions to boost productivity and reduce costs continues."

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Financial services was the strongest sector across both traditional and as-a-service sourcing, while Consumer Packaged Goods (CPG) and Business Services also performed well.

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