European IT and BPO outsourcing off to strong start

IT and business services take-up in the Europe, Middle East and Africa (EMEA) region was strong in the first quarter of this year, with $7.5bn spent by organisations in the region.

According to figures from tech research and advisory company ISG, which measures IT and business process outsourcing (BPO) contracts signed for more than $5m, this was 21% higher than in the equivalent period last year and the first time spending in the region has gone above $7bn.

Meanwhile, the UK showed strong growth, with the value of traditional IT outsourcing and BPO contracts signed in the three-month period reaching $1.1bn, which was 27% higher than in the same period last year.

Steve Hall, president of ISG EMEA, said the year start shows an acceleration in demand across Europe. “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,” he said. “Growth slowed toward the end of last year, but has since bounced back to the levels we saw in the first half of 2021.”

Spending on cloud-based services is now over half of total spending, at $3.9bn, according to ISG, after a 44% increase compared with a year earlier. Within this segment, the value of infrastructure-as-a-service contracts in the region increased by 58% to $2.9bn during the quarter, while software-as-service spend grew by 15% to reach $1bn.

Traditional IT outsourcing and BPO – referred to as managed services by ISG – recorded a 3% increase in spending, hitting $3.7bn in the quarter. IT outsourcing spending fell by 11% in the quarter compared with the previous year, which was hit by reductions in spending by financial services and energy companies. But BPO investments soared by 84% to $971m, with strong demand across all industries.

The number of managed contracts signed reached a record 256 during the quarter – 15% more than in the same period last year.

UK-based organisations spent $1.1bn, a 27% increase, and the Nordic and Southern regions saw strong grown of 26% and 93%, respectively.

Organisations in German-speaking countries in the DACH region spent $823m on IT and BPO services, while $502m was spent in France.

ISG said it expects cloud-based services to increase by 20% globally this year, with managed services spending rising by 5%.