Combined market up 4% from Q3, but down 1%
year on year
Managed services generates record full-year
ACV, up 4%
Demand for IT and business services in Europe dipped slightly in
the fourth quarter, but was up sequentially from the third quarter,
indicating the start of a potential market rebound, according to
the latest state-of-the-industry report from Information Services
Group (ISG) (Nasdaq: III), a leading global technology research and
advisory firm.
The EMEA ISG Index™, which measures commercial outsourcing
contracts with annual contract value (ACV) of US $5 million or
more, shows ACV for the combined market (both managed services and
cloud-based as-a-service) at US $7.2 billion for the fourth
quarter, down 1 percent from the prior year, but up 4 percent from
the third quarter.
“The European market appears poised for a rebound,” said Steve
Hall, president, ISG EMEA. “Although down year on year against some
tough comps, most segments showed positive sequential growth in the
fourth quarter. We also saw growth in new-scope awards and a drop
in contract restructurings year on year. This could indicate a
bottoming-out of the market, as we begin to move past aggressive
cost optimization and start to see new shoots of investment.”
Hall said several signs point to a better 2024. “Conditions are
right for a turnaround. Inflation is cooling rapidly and central
banks are planning interest rate cuts. That should create a more
friendly environment for enterprise spending and capital deployment
in 2024.”
Q4 Results by Segment
Managed services ACV for the fourth quarter came in at US $3.9
billion, up 7 percent versus the prior year. There were 268 managed
services contracts signed in the quarter, up 3.5 percent, including
three mega deals (contracts with ACV of US $100 million or more).
Although the number of such deals was even with a year ago, the ACV
of this year’s mega deals was 7 percent higher. The ACV of new
scope awards was US $2.7 billion, up 13 percent year on year, while
that of restructured contracts fell 4.5 percent, to US $1.2
billion.
Within managed services, IT outsourcing (ITO) advanced 10
percent, to US $3.0 billion, driven by strength in applications
development and data center services, while business process
outsourcing (BPO) dipped 2 percent, to US $929 million.
ACV in the as-a-service (XaaS) segment fell 8 percent versus the
prior year, to US $3.3 billion, but was up 1 percent from the prior
quarter, the second straight quarter it rose sequentially. Within
this segment, infrastructure-as-a-service (IaaS) fell 15 percent,
to US $2.2 billion, while software-as-a-service (SaaS) rose 8
percent, to US $1.1 billion.
Full-Year Results
EMEA’s combined market ACV was US $29.0 billion, down 3 percent
over the prior year. It was the first time since 2016 EMEA had a
down market for the full year.
Managed services had a record year, with ACV of US $15.9
billion, up 4 percent. ITO, at US $12.0 billion, was up 4 percent,
while BPO, at US $3.9 billion, was up 3 percent. A total of 1,093
managed services contracts were awarded in 2022, even with the
prior year. Twelve of those were mega deals, down from 14 in the
prior year but up 40 percent by total ACV. Among sectors, financial
services, up 26 percent, and energy, up 30 percent, drove the
market.
The XaaS segment generated ACV of US $13.1 billion, down 9
percent, the first time XaaS ACV fell in the EMEA region for the
full year. IaaS fell 15 percent, to US $8.9 billion, while SaaS
rose 4 percent, to US $4.2 billion. XaaS accounted for 45 percent
of the combined market in 2023, down from 49 percent in 2022.
Geographic Performance
In the fourth quarter, the region’s largest market, the U.K.,
generated US $1.3 billion of managed services ACV, up 54 percent
versus the prior year. It was the fourth consecutive quarter ACV in
the U.K. topped US $1 billion – a first. France, the region’s
third-largest market, produced ACV of US $801 million, up 67
percent, while DACH, the region’s second-largest market, saw its
ACV decline 21 percent, to US $730 million
For the full year, the U.K. generated US $5.6 billion of managed
services ACV, its second-best year ever, behind 2012. The Benelux
market was the only other geographic market in positive territory
for the year, up 16 percent, to US $1.2 billion. DACH was down 23
percent, to US $2.9 billion, while France dipped 4 percent, to US
$2.2 billion.
2024 Global Forecast
ISG is forecasting 4.25 percent growth for managed services and
15 percent revenue growth for XaaS in 2024.
“We expect spending for application modernization and business
transformation projects led by GenAI to continue at high levels in
2024. Public cloud spending should accelerate as optimizations
phase out. We also expect small discretionary deals to recover, as
well as Financial Services industry spending to rebound,” Hall
said.
About the ISG Index™
The ISG Index™ is recognized as the authoritative source for
marketplace intelligence on the global technology and business
services industry. For 85 consecutive quarters, it has detailed the
latest industry data and trends for financial analysts, enterprise
buyers, software and service providers, law firms, universities and
the media. For more information about the ISG Index, visit this
webpage.
The 4Q23 Global ISG Index results were presented during a
webcast on January 18. To view a replay of the webcast and download
presentation slides, visit this webpage.
About ISG
ISG (Information Services Group) (Nasdaq: III) is a leading
global technology research and advisory firm. A trusted business
partner to more than 900 clients, including more than 75 of the
world’s top 100 enterprises, 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;
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 1,600
digital-ready 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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version on businesswire.com: https://www.businesswire.com/news/home/20240122943164/en/
Press:
Philipp Jaensch, ISG +49 151 730 365 76
philipp.jaensch@isg-one.com
Will Thoretz, ISG +1 203 517 3119 will.thoretz@isg-one.com
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