Cloud-based XaaS projects have fuelled a dip in the global IT outsourcing market according to beancounters at ISG.
The annual contract value (ACV) of the commercial outsourcing contracts ISG tracks fell by three per cent to $23.2 billion in the three months to 30 September 2022.
ISG keeps tabs on large managed services, and XaaS deals with an ACV of above $5 million. For those not in the know, this is the first annual fall its index has registered since the final quarter of 2016.
Hyperscale cloud certifications in the IT services sector have rocketed over the past three years, according to ISG.
The outfit said that Enterprise demand for cloud modernisation is at an all-time high. Much of this is taking place on hyperscale clouds.
A new report said that hyperscale cloud certifications grew by more than 300 percent between 2020 and 2022.
Of the total cloud-certified workforce, more than half have Azure certification, over 30 percent have Amazon Web Services certification and eight per cent have Google Cloud certification.
More than 40 percent of the workforce at leading IT services firms was hired in the last 12 months, according to data from ISG, the technology research and advisory firm.
In an advisory note, Stanton Jones, Director and Principle Analyst at ISG, said: “We’ve been discussing attrition in the IT services sector for a couple of quarters now. And rightly so. It’s the number one issue impacting enterprise IT services buyers today. The good news is that the data shows attrition has likely peaked at most IT services firms.
An Information Services Group report claims that enterprises are increasingly embracing a cloud-first approach to their IT investments.
The “2021 ISG Provider Lens Public Cloud – Services & Solutions Report for the UK” said that enterprises are looking to service providers to help them migrate more of their workloads to the public cloud.
It finds many large UK enterprises interested in hybrid cloud environments, which enable continued use of legacy IT systems, even though an increasing number of companies anticipate a time when they would migrate all of their IT assets to the cloud. Small and medium-sized enterprises, meanwhile, are looking at infrastructure-as-a-service (IaaS) options to replace their depreciated hardware assets.
ISG partner Jan Erik Aase said that the move to the cloud is expected to be the primary driver of IT market growth in the UK in the coming years.
Europe’s technology and business services market reached a record high in the third quarter, paced by surging demand for cloud-based services, even as spending on managed services slowed for the third straight quarter, according to an ISG report.
ISG is forecasting the market for cloud-based services (IaaS and SaaS) will grow 25 percent globally in 2021, up from its 21 percent growth forecast last quarter. The firm also is raising its forecast for managed services growth to 10.1 percent, up from its prior forecast of nine percent.
Enterprises in the UK have been restarting SAP projects slowed or suspended during the pandemic and modifying their SAP platforms to adapt to Brexit-related changes, according to a new report published today by Information Services Group.
The 2021 ISG Provider Lens SAP HANA Ecosystem Services report for the UK found companies in the country had temporarily halted or slowed SAP implementations as they focused on maintaining operations and controlling costs early in the pandemic. But since the second half of 2020, many stalled projects have gained momentum and the outlook for SAP in the region is positive, ISG says.
ISG Provider Lens Research partner Jan Erik Aase said: “SAP S/4HANA transformations and cloud implementations are now gaining speed in the UK. Digital transformations are helping enterprises meet new challenges from the pandemic, and service providers are adjusting to new realities.”
IT research outfit Information Services Group (ISG) has launched an expanded global cybersecurity unit to help clients contend with the growing threat of cyberattacks in an increasingly connected and vulnerable technology environment.
ISG Cybersecurity is a dedicated, “vendor-agnostic” business unit that supports enterprise customers. The expanded offering, includes dedicated cybersecurity professionals operating in key markets worldwide to support clients via the ISG iFlex global delivery network.
SG Cybersecurity co-lead Doug Saylors said: “ISG has provided cybersecurity advisory services since our inception, typically as part of our sourcing advisory offerings for Infrastructure, ADM and Network services. Our new, global cybersecurity unit responds to increasing enterprise demand for independent advice and support on cybersecurity strategy and execution across all domains, with an added focus on cloud security.”
A report from ISG said that large and mid-sized enterprises are embracing intelligent automation at a rapid pace.
ISG Head of Intelligent Automation and AI Wil Harris said that some of this was due to COVID-19 which forced companies to find ways to remain competitive and still deliver value to customers.
He said that pre-pandemic, most AI and automation projects were focused on IT infrastructure operations and traditional back-office tasks such as finance and accounting.
“Now, however, automation is moving to the front office, with customer service, sales and marketing and supply chain automation all introducing automation to make them more efficient”, he said.
Most companies are not interested in reducing headcount but increasing productivity.
With the COVID-19 pandemic posing steep challenges to the contact center industry worldwide this year, providers are facing additional uncertainties in Europe and the UK amid the looming no-deal Brexit and changes to UK regulations affecting temporary workers, according to a new report ISG report.
The report with the punchy title “2020 ISG Provider Lens Contact Centre – Customer Experience Services report for Europe and the UK” found trade and labour issues remained high on the industry’s agenda even as the pandemic brought rapid changes in consumer behaviour.
Reforms to the UK’s IR35 regulations, which limit the role of temporary worker, came as a blow to many public- and private-sector enterprises that hire freelancers, experts, digital consultants and other types of independent workers.
The new rules could open up opportunities for organisations willing to collaborate with providers, startups and technology vendors for “near shoring” or offshoring of labour. Meanwhile, negotiations over the UK’s exit from the EU continue to loom over the region even as many countries, especially Italy and the UK, were hit hard by the pandemic.
Information Services Group (ISG) said that the annual value of outsourcing deals in the Europe, Middle East and Africa (EMEA) region rose almost four percent in the first quarter of 2020.
The analyst outfit said it would have grown at a much higher rate had the impact of COVID-19 not hit the market in March.
The firm uses its EMEA ISG Index which measures commercial outsourcing contracts with annual contract value (ACV) of €5 million (£4 million) or more, shows combined market ACV (including both as-a-service and managed services) in EMEA increased by 3.8 percent year on year, to €4.5 billion (£3.9 billion).
Europe’s managed services contracts in the second quarter exceeded £2.4 billion for the second quarter running, indicating a potential return to pre-2015 spending levels, according to the latest state-of-the-industry report from Information Services Group (ISG)
The EMEA ISG Index measures commercial outsourcing contracts with annual contract value (ACV) of €4 million or more, shows the region’s combined first-half ACV, including managed services and as-a-service contracts, was up 12 percent.
The European outsourcing market saw a record first quarter this year but beancounters at ISG, said that the UK has slipped behind other parts of Europe
In the first three months of the year the value of outsourcing grew 23 percent year on year to £3.4 billion.
Traditional outsourcing, which has often faltered in recent quarters, saw growth of 24 percent as-a-service outsourcing rose 21 percent.
Steve Hall, partner and president of ISG, said: “The drive for digital transformation shows no signs of slowing. European businesses are investing in their future, despite the continuing political and economic uncertainty in Europe and the six-month extension to the Brexit deadline.
“Much of EMEA’s regional growth is being fuelled by a robust IaaS market, with hybrid and multi-cloud emerging as the architecture of choice.”
In the UK, traditional outsourcing grew a “modest” seven per cent, ISG said, with the number of new deals flat.
“With an extended timeline and no clear conclusion in sight for the Brexit negotiations, UK companies are continuing to exercise caution in their traditional sourcing investments and are focusing their spending on new technologies that will increase their agility and efficiency,” the analyst explained.
The DACH market saw traditional outsourcing grow 63 per cent year on year after “several quarters of lacklustre contracting”.
ISG said the German market was helped by the start of a number of contracts that had previously been delayed as a result of Brexit uncertainty.
Globally, the market watcher said that regions globally are preparing for economic struggles.
“Growth has slowed in Europe and China, large enterprises appear to be preparing for a downturn in the US during the second half of the year and concerns of a broader, global slowdown remain. While the dark clouds of a looming economic downturn are on the horizon, the long-term forecast for sourcing remains sunny,” Hall said
Beancounters at ISG said that the UK outsourcing market was rubbish last year.
Initially, there were brief signs of a recovery in the UK’s outsourcing market, but it was not enough for declines to continue in 2018.
The traditional outsourcing market in the UK fell 27 percent to £2.2 billion last year, despite a five percent increase in contract numbers.
UK outsourcing market is showing of picking up in the third quarter, according to beancounters at analyst outfit ISG.
Outsourcing had been battered like a Mars Bar in a Scottish chip shop ever since the announcement that the UK would have a crack at leaving the EU.
According to ISG, traditional outsourcing in the UK rose 40 percent year on year to £510 million. To be fair though the third quarter of 2017 was bleak.
Across EMEA, traditional outsourcing grew 55 percent. ISG’s EMEA index also tracks as-a-service (cloud) outsourcing, which grew 56 percent.
Steve Hall, president at ISG, said: “It is encouraging to see EMEA take a leap forward in the adoption of cloud-based solutions.
“Previously lagging the rest of the world, this region appears to be catching up – demonstrating in the last quarter the highest year-over-year growth rates for IaaS and SaaS among the three regions in our ISG Index.”
ISG cited Brexit as the main cause of the recent struggles in the UK market.
Normally the outsourcing market typically hit €800 million in two or three months each year, but has only done that in one quarter since the referendum. The number of UK contracts has increased steadily since the referendum; however the value of deals is smaller.
ISG claimed that the UK is the only market to have seen a long-term decline since the middle of 2016.
Hall added: “The traditional sourcing market in the UK is showing clear signs of caution as the Brexit deadline approaches. Despite a high level of activity in the market, deal sizes are smaller. However, the strong shift to as-a-service sourcing indicates that UK companies, and others across Europe, are recognising the value in remaining agile to help them adapt to uncertain political and economic factors.”
The 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.
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