Europe’s IT and Business Services Market Off to Strong Start in 2022, ISG Index™ Finds
Europe’s IT and business services market jumped out to a strong start in 2022, with record first-quarter demand for cloud-based services and continuing momentum in managed services, 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 eclipsed US $7 billion for the first time in a quarter, coming in at a record US $7.5 billion, up 21 percent year over year, and up 8 percent sequentially from the fourth quarter.
“Europe’s combined market has been steadily growing as the region’s demand for cloud-based services catches up with the rest of the world,” said Steve Hall, president of ISG EMEA. “Growth slowed toward the end of last year, but has since bounced back to the levels we saw in the first half of 2021.”
Regional demand for cloud-based services (XaaS) continues to accelerate. ACV advanced 44 percent, to a record US $3.9 billion in the first quarter, and now accounts for 51 percent of the combined market, the highest proportion ever. It was the third straight quarter the region has seen XaaS growth of more than 40 percent.
Within the XaaS segment, infrastructure-as-a-service (IaaS) ACV soared 58 percent, to a record US $2.9 billion in the quarter. Software-as-Service (SaaS) advanced 15 percent, to US $1 billion, but was off 2 percent from a record fourth quarter.
Managed services ACV, meanwhile, rose 3 percent, to US $3.7 billion. It was the sixth straight quarter this segment surpassed US $3.4 billion of ACV, the longest such period of sustained high demand ever recorded by the ISG Index.
Within managed services, IT outsourcing (ITO) slumped 11 percent year over year, to US $2.7 billion, with sequential declines in financial services and energy, the latter amid a slowdown in the oil and gas sector. Business process outsourcing (BPO) soared 84 percent, to US $971 million, driven by strong demand across all industries and a mega-deal in the media and communications sector. Industry-specific BPO solutions in financial services and the utility sectors accounted for more than 30 percent of ACV growth in the quarter.
A record 256 managed services contracts were awarded in the first quarter, up 15 percent from last year and up 25 percent from the fourth quarter. New-scope awards dominated, with 176 such deals in the quarter, valued at US $2.3 billion. It was the sixth straight quarter new-scope ACV surpassed US $2 billion, a streak not seen in the last 10 years. The trend toward smaller contracts continued, with a record 151 deals in the US $5 million to US $10 million range, the smallest band measured by the ISG Index.
From a geographic perspective, the UK market continued its strong, post-Brexit recovery, exceeding US $1 billion in managed services ACV for the second quarter in a row and the third quarter in the last four. First-quarter ACV was US $1.1 billion, up 27 percent over the prior year. The Nordics (up 26 percent) and Southern Europe (up 93 percent) also contributed to the region’s growth.
DACH and France continued a recovery that began in the second quarter of 2021. Although both markets were down against a strong first quarter last year, DACH’s first-quarter ACV, at US $823 million, was up 33 percent sequentially from the fourth quarter, while France’s ACV of US $502 million, though down slightly versus the prior quarter, represented the fourth time in the last five quarters ACV topped US $500 million.
2022 Global Forecast
ISG is forecasting the global market for cloud-based XaaS (IaaS and SaaS) will grow 22 percent for the year, up from its 20 percent forecast last quarter, while the global market for managed services is expected to grow 5.1 percent, unchanged from last quarter’s forecast.
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 78 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. In 2016, the ISG Index was expanded to include coverage of the fast-growing as-a-service market, measuring the significant impact cloud-based services are having on digital business transformation. ISG also provides ongoing analysis of automation and other digital technologies in its quarterly ISG Index presentations.
For more information about the ISG Index, visit this webpage.
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 800 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 1,300 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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Will Thoretz, ISG
+1 203 517 3119
Kate Hartley, Carrot Communications for ISG
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