Outsourced IT and business services hit record levels in 2021

Organisations across Europe spent $26.5bn (£19bn) on IT and business services in 2021, the highest annual spend ever recorded by tech advisory the Information Services Group (ISG).

Cloud-based services continued to close the gap on traditional IT outsourcing – managed services – with another quarter of significant growth.

ISG reported a 23% increase in sales compared with the previous year, with as-a-service contracts increasing in value by 41%, to reach $12.6bn, and traditional outsourcing sales 11% up, to $13.9bn. Business process outsourcing (BPO) deals were up 45% in terms of value, reaching $2.6bn.

The report, which records contracts worth $5m or more, revealed that the UK saw an overall increase of 2% in the total value of contracts in 2021, compared with 2020, reaching $3.6bn.

Meanwhile, following a 70% fall in spending in the final quarter, the market in Germany, Austria and Switzerland (DACH) saw a 29% fall in total spending in 2021, compared with 2020, at $3bn.

“DACH was impacted by supply chain disruptions and a slowdown in global consumer spending, which led to an extension of existing scope and a pause in larger transformation deals,” said Steve Hall, president of ISG in Europe.

Meanwhile, Europe’s third biggest economy, France, recorded an 82% spending increase for the year after posting four straight quarters of year-on-year growth, taking it to $2.2bn.

“Despite signs of a slowdown last quarter, Europe appears to be on a solid upward trajectory overall,” said Hall. “Combined contract value has stayed above $5bn per quarter since mid-2020, including four consecutive $6bn quarters and the latest quarter topping $7bn.”

Globally, ISG expects cloud services spending to increase by 20% in 2022, compared with last year, and traditional IT outsourcing to increase by just over 5%.

Spending this year is expected to be fuelled by renewals to expiring contracts, with contracts with a combined value of $18.5bn due to expire in 2022. ISG said there was a trend for renewals to go to existing suppliers, but with enterprise customers requesting additional services.