Fourth-quarter combined ACV rises 27 percent sequentially to
€3 billion, though flat compared with prior year
Region's as-a-service ACV climbs to record €1.1 billion in
4Q
Full-year combined EMEA ACV reaches €12.2 billion, up 3
percent on prior year.
LONDON, Jan. 17, 2018 /PRNewswire/ -- The EMEA
sourcing market rebounded in the final quarter of 2017, with
double-digit growth in both traditional and as-a-service
contracting values over the previous quarter, according to the
findings of the 4Q17 EMEA ISG Index™ released by Information
Services Group (ISG) (Nasdaq: III), a leading global technology
research and advisory firm.
Data from the EMEA ISG Index™, which measures commercial
outsourcing contracts with annual contract value (ACV) of €4
million or more, reveal the EMEA market, which fell sharply in the
third quarter after starting the year strongly, rebounded in the
fourth quarter, up 27 percent sequentially. Year-over-year,
however, EMEA, was flat with the prior year, with combined
fourth-quarter ACV of €3 billion in 2017. Traditional sourcing, at
€1.9 billion, was down 11 percent versus the prior year, while
as-a-service sourcing, at a record €1.1 billion for the region, was
up 27 percent.
For the full year, EMEA generated €12.2 billion in ACV, up 3
percent against 2016. Traditional sourcing ACV of €8.3 billion was
down 8 percent, but as-a-service sourcing soared 41 percent, to
€3.9 billion, as demand for cloud-based services accelerated across
the region.
The rise of as-a-service sourcing was driven by demand for
Infrastructure-as-a-Service (IaaS). While Software-as-a-Service
(SaaS) ACV of €900 million was flat for the year, IaaS ACV soared
58 percent versus the prior year, reaching €3 billion. In contrast,
traditional sourcing ACV declined for the fourth consecutive year,
despite a slight increase in the number of contracts. Although ITO
values, at €6.5 billion, remained steady, BPO ACV in the region
fell to €1.8 billion, its lowest level in a decade.
Globally, the market also saw a strong final quarter, with ACV
for the combined market establishing a new record at €34.6 billion.
Global trends reflect those in EMEA, with newer technologies
continuing to gain momentum. As-a-service continued to reach new
highs on a global scale, overtaking traditional sourcing in the
Americas and Asia Pacific in the
fourth quarter, as businesses spend more on cloud-based technology
to drive digital transformation.
Market Insights
Looking at traditional sourcing by
geography, 2017 saw a mix of performance across the region.
Despite uncertainty around Brexit, the UK saw sourcing activity
and ACV grow in 2017. This follows the broader trend of
organizations entering into higher numbers of smaller-value
contracts, as they look to take a more agile approach to sourcing.
The 206 contracts and €3.2 billion in ACV were both up 18 percent
year on year, albeit on a soft compare with 2016, the UK's weakest
year in a decade.
France, despite a dip in the
fourth quarter of 2017, posted annual ACV growth of 8 percent. The
number of contract awards, although down very slightly on the
previous year, remains strong, at 62. In contrast, Southern Europe
ACV plummeted more than 70 percent to its lowest level in five
years.
With fewer large deal awards, ACV in DACH fell 16 percent in
2017. The 165 contracts signed was also down compared with the
previous year, by 13 percent. The continuing uncertainty following
the elections in Germany pulled
the market down in the second half of 2017.
An absence of large deals in the Nordics region resulted in a
decline in ACV of 18 percent, despite contract numbers remaining
steady.
Sector Breakdown
All industry sectors in EMEA
demonstrated growth in as-a-service ACV in 2017, while traditional
sourcing performance varied.
Financial Services dominated in EMEA during 2017. Combined ACV
in the sector reached €3.4 billion, an increase of 21 percent
compared with 2016 levels. As-a-service ACV hit €700 million in
Financial Services, a year-on-year increase of 40 percent.
The Business Services sector mirrored the performance of
as-a-service contracting in Financial Services, also recording AVC
of €700 million and a 40 percent increase compared with the prior
year.
In contrast, Manufacturing's combined ACV fell 21 percent in
2017, pulled down by a steep decline in traditional sourcing, and
despite a 50 percent increase in as-a-service values. Recent trends
indicate significant spending on supply chain optimization in the
manufacturing sector. Connected devices supported by edge
computing, IoT, and data analytics will increasingly become a major
focus in the manufacturing sector.
Forecast
Steven Hall,
partner and president, ISG, said: "Despite a dip in the third
quarter of 2017, the market recovered in the final quarter and
demonstrated steady overall performance for the year. It is
especially heartening to see the adoption of cloud-based services
accelerate across the region, following a slow start in previous
years. European businesses are seeing the potential of new
technologies to help them on their digital transformation journeys,
while reducing costs and improving agility. Macroeconomic
uncertainty across Europe makes
the business of predictions tricky. Nonetheless, the trend towards
as-a-service is one we can expect to see accelerating over the next
12 months, with consistent growth of 20 percent or higher for the
as-a-service market."
About the ISG Index™
Now in its 61st consecutive
quarter, the ISG Index™ provides a quarterly review of the latest
sourcing industry data and trends for clients, service providers,
analysts and the media. For 15 years, it has been the authoritative
source for marketplace intelligence related to outsourcing
transaction structures and terms, industry adoption, geographic
prevalence and service provider performance.
The 4Q17 EMEA ISG Index™ was presented during a conference call
and webcast for media and analysts on January 15, 2018.
About ISG
ISG (Information Services Group) (Nasdaq:
III) is a leading global technology research and advisory firm. A
trusted business partner to more than 700 clients, including 75 of
the top 100 enterprises in the world, ISG is committed to helping
corporations, public sector organizations, and service and
technology providers achieve operational excellence and faster
growth. The firm specializes in digital transformation services,
including automation, cloud and data analytics; sourcing advisory;
managed governance and risk services; network carrier services;
technology strategy and operations design; change management;
market intelligence and technology research and analysis. Founded
in 2006, and based in Stamford,
Conn., ISG employs more than 1,300 professionals operating
in more than 20 countries—a global team known for its innovative
thinking, market influence, deep industry and technology expertise,
and world-class research and analytical capabilities based on the
industry's most comprehensive marketplace data. For more
information, visit www.isg-one.com.
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