Beancounters at ISG say that the European market for IT and business services is doing well with record demand for cloud-based services in the first quarter and continued strength in managed services,
The EMEA ISG Index, which measures commercial outsourcing contracts with annual contract value (ACV) of US $5 million, shows ACV for the combined market, which includes both as-a-service and managed services, reached US $6 billion, up 20 percent year on year, but off five per cent from a record fourth quarter.
Cloud-based as-a-service ACV reached a quarterly record of $2.5 billion, up 16 percent versus the prior year. Within this segment, infrastructure-as-a-service (IaaS) climbed 19 percent, to a record $1.8 billion, while software-as-a-service (SaaS) rose nine percent, to a record $658 million.
Managed services, meanwhile, produced its second straight strong quarter, with ACV of US $3.5 billion, up 23 percent year on year, fuelled by growth in both IT outsourcing (ITO) and business process outsourcing (BPO) and strong results in the UK, France and DACH. ITO was up 17 percent year on year, to $3.0 billion, on strength in both ADM and infrastructure services, while BPO surged 66 percent, to $521 million, on strong demand for industry-specific, finance and accounting, and engineering and R&D services.
ISG president Steve Hall said that EMEA has produced two consecutive quarters with $6 billion or more of ACV, adding more than $1.4 billion from its pandemic low.
“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.”
Hall pointed out that three of the four mega-deals—those with ACV of US $100 million or more—in the first quarter 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.”
Among significant IT awards in the first quarter, Mphasis contracted with Ardonagh Group, the UK independent insurance broker, to support its digital transformation. On the infrastructure side, Atos won a large digital workplace contract with telecom company Wind Tre in Italy, and HCL inked a five-year digital workplace services agreement with Airbus, the European aerospace manufacturer.
Within the BPO space, KPIT signed significant engineering services deals with BMW and automotive technology company Veoneer to support work on autonomous driving and intelligent mobility. ISS Group, meanwhile, secured an eight-year extension with Barclays in the U.K. to provide integrated facility and workplace services across the bank’s operations in 30 countries.
With the automotive sector becoming a battleground for major public cloud providers, BMW Group announced it is migrating workloads to AWS, joining automakers Renault and Volkswagen on AWS. In the travel sector, ISG advised on one of the biggest cloud deals in the region this quarter with the signed agreement between global travel technology company Amadeus and Microsoft Azure.
In the SaaS segment, Microsoft signed deals this quarter with Daimler, GlaxoSmithKline and IKEA, while Oracle secured contracts with NatWest Group to standardise its various banks on Oracle Fusion in the cloud.
ISG is forecasting the global market for cloud-based services (IaaS and SaaS) will grow 18 percent in 2021, down slightly from its 20 percent forecast at the start of the year. ISG, meanwhile, has raised its growth forecast for managed services to five percent, up from three percent at the start of the year.
