As-a-service sourcing contracts grow

Forwarders-set-to-see-growthThe value of as-a-service sourcing contracts have reached an all-time high in EMEA, but a drop in traditional sourcing resulted in a weak quarter overall.

Beancounters at Information Services Group (ISG) have added up some numbers and decided that the 3Q17 EMEA ISG Index shows commercial sector outsourcing contracts with an annual contract value (ACV) of £3.5 million.

The index shows that the as-a-service sector continued its upward trajectory, soaring 48 percent, to £892 million as companies continue to seek cloud and digital solutions to improve operating efficiency and develop new growth opportunities.

This boost countered the significant shortfall in traditional sourcing, which slumped 43 per cent, to £1.1 billion which is its lowest point in a decade.

The falloff in traditional sourcing, upon which EMEA depends more than other regions, caused combined ACV to drop 23 percent, to £2 billion due in part to a lack of large contracts in the quarter.

Barry Matthews, partner at ISG, said that 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.

“Macroeconomic events in EMEA – the recent German election and continued uncertainty surrounding Brexit – continue to slow buying decisions. 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,” he said.

The UK, despite a weak third quarter, posted its strongest year-to-date performance in five years. UK ACV, at£2.2 billion was up 15 percent year over year, while the number of contracts rose 13 percent for the same period.