LONDON--(BUSINESS WIRE)--
Europe’s IT and business services market continued its year-over-year growth in the third quarter, amid signs that economic concerns may be dampening demand, according to the latest state-of-the-industry report from Information Services Group () (Nasdaq: ), 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 (both managed services and cloud-based XaaS), remains near record highs, coming in at US $7.6 billion, up 7 percent year over year. It was the third straight quarter the region surpassed US $7.5 billion in ACV, although growth has slowed sequentially the last two quarters.
“European enterprises continue to press ahead with their digital transformation initiatives, but we are seeing signs of a slowdown in spending over concerns about the region’s economy,” said Steve Hall, president of ISG EMEA.
Europe continues its shift to cloud computing, with XaaS up 5 percent for the quarter, to US $3.8 billion, but it was the lowest quarterly growth for XaaS since the start of 2015. Within this segment, infrastructure-as-a-service (IaaS) was up 13 percent versus the prior year, to US $2.9 billion, while the smaller software-as-a-service (SaaS) market dropped 14 percent, to US $924 million.
“Spending on cloud computing has been growing rapidly in Europe, averaging more than 40 percent growth a quarter over the last five quarters,” said Hall. “This quarter marks a decided slowdown in that trend, primarily due to a pullback in SaaS spending, as decision-making slows in response to the broader economic climate.”
Demand for managed services, meanwhile, continues to be strong. A record 281 managed services contracts were signed during the third quarter, up 15 percent year on year. ACV rose 9 percent, to US $3.8 billion – the third straight quarter above the US $3.5 billion mark – although it was down 3 percent against the prior quarter.
Within managed services, IT outsourcing (ITO) rose 21 percent, to US $3.1 billion, on the strength of double-digit growth in infrastructure and application development and maintenance (ADM) services, while business process outsourcing (BPO) slumped 23 percent, to US $702 million, although demand for engineering and R&D services remains strong.
From a geographic perspective, the region’s largest market, DACH (Germany, Austria and Switzerland), generated US $1.1 billion of managed services ACV, more than double that of the prior year, on the strength of ADM and infrastructure services. The UK, on the other hand, saw its string of US $1-billion quarters snapped at three, with ACV coming in around US$700 million, up more than 60 percent versus a weak year-ago quarter. Third-quarter growth in the UK was driven by strong demand for ADM services and from the Banking, Financial Services and Insurance (BFSI) sector. France was up slightly, to around US $780 million, while the Nordics and Southern Europe, with smaller ACV, advanced 5 percent and 19 percent, respectively.
Year-to-Date Results
EMEA’s combined market ACV reached a record US $23.2 billion for the first nine months, up 15.5 percent over the prior year. XaaS advanced 23 percent, to a record US $11.5 billion, while managed services rose 9 percent, to a record US $11.5 billion, on record volume of 798 contracts, up 15 percent versus the prior year.
2022 Global Forecast
ISG sees economic uncertainty caused by rising interest rates, energy shortages, supply chain disruptions and continuing inflation dampening enterprise demand in the near term. The firm maintained its growth forecast for managed services at 3.5 percent for the year, and lowered its forecast for XaaS to 10.5 percent, down from 18 percent in the prior quarter.
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 80 consecutive quarters (20 years), 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 .
About ISG
ISG (Information Services Group) (Nasdaq: ) 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 .
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