Cloud service spending almost matches traditional IT outsourcing

Spending on cloud-based IT as a service in the Europe, Middle East and Africa (Emea) region almost matched investments made in traditional IT outsourcing during the latest quarter.

Figures from ISG show that traditional IT outsourcing spend plummeted by 43% to €1.3bn during the third quarter of this year – its lowest level for more than 10 years – while as a-service spending jumped 48% to €1bn, its highest-ever level.

As-a-service contracts include software as a service (SaaS), infrastructure as a service (IaaS) and platform as a service (PaaS). Traditional IT outsourcing includes a supplier taking over responsibility for an IT service and bringing its own people in to do it, or developing and supporting software.

ISG reported that despite the poor third quarter, the first three quarters of this year combined showed a 3% increase in overall spending to €9bn.

Barry Matthews, partner at ISG, said: “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.”

Matthews said spending had been reined in because of uncertainties around Brexit and the recent German election.

“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 added.

Despite uncertainties in the UK and the weak third quarter, spending in the UK in the year to date is the highest for five years at €2.5bn, 15% more than in the equivalent period last year.

According to ISG, the financial services sector spent more on both traditional and as-a-service sourcing, with more than $2bn spent on as-a-service technologies so far this year. Manufacturers and telecoms providers spent less during the same period, however.