The European IT and business services market “remains robust” as cloud-based services chalked up record demand in Q1 and managed services continue to flourish.
That's according to ISG’s latest state-of-the-industry report, which has measured commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, to determine overall market performance in EMEA.
It found that the combined market, which includes both 'as a service' and managed services, hit $6 billion for the second consecutive quarter. That’s up 20% year on year, but five percent short from a record Q4.
“EMEA has produced two consecutive quarters with US $6 billion or more of ACV, adding more than US $1.4 billion from its pandemic low,” commented Steve Hall, president of ISG EMEA.
“Importantly, the region is seeing strength in both the 'as a service' segment, as more and more enterprises adopt a public or hybrid cloud strategy, and on the managed services side, which is experiencing a resurgence.”
Cloud-based as a service ACV reached a quarterly record of $2.5 billion, marking a 16% increase over the previous year. Within this segment, infrastructure as a service (IaaS) climbed 19% to a record $1.8 billion, while software as a service (SaaS) was up 9% to a record $658 million.
Managed services produced its second straight strong quarter, growing 23% year on year to an ACV of $3.5 billion – an increase fueled by growth in both IT outsourcing (ITO) and business process outsourcing (BPO), as well as strong results in the UK, France, and DACH.
ITO grew 17% year on year to $3.0 billion, on strength in both ADM and infrastructure services, while BPO recorded a 66% hike to $521 million, thanks to strong demand for industry-specific, finance and accounting, and engineering and R&D services, ISG said.
The research firm also revealed that three of four global $100m+ “mega deals” in Q1 were awarded in the EMEA region.
“That brings the total to eight mega-deals over the last two quarters; you have to go back to early 2017 to find a two-quarter period in EMEA that had more mega-deals awarded,” Hall added.
In the UK, managed services ACV hit $866 million, up 20% over last year, making it the fourth consecutive quarter above $800 million. That’s a sustained rebound for the market, ISG said, but it remains below the $1 billion quarters that were “typical prior to 2017 and the onset of Brexit uncertainty”.
Elsewhere, DACH generated more than $1 billion managed services ACV in Q1 for the second consecutive quarter, with the region now accounting for almost 30% of EMEA’s managed services ACV. France also had its best ACV quarter since 2014, totalling $595 million.
Looking forward to 2021, ISG forecasts that the global market for cloud-based services (IaaS and SaaS) will grow 18%, down slightly from its 20% prediction at the start of the year. The firm has also raised its growth forecast for managed services to five percent, up from its original three percent estimate at the start of the year.
