EMEA’s first quarter combined ACV hit a record US$7.5 billion, up 21%
Demand for cloud services continues to accelerate, up 44%
LONDON, April 07, 2022–(BUSINESS WIRE)–The European IT and business services market got off to a strong start in 2022, with record demand for cloud-based services in the first quarter and continued momentum in managed services, according to the latest status report of the sector published by Information Groupe Services (ISG) (Nasdaq: III), a leading global technology research and consulting company.
The EMEA ISG Index™, which measures business outsourcing contracts with an annual contract value (ACV) of US$5 million or more, shows ACV for the combined market exceeded US$7 billion for the first time in a quarter, hitting a record high of US$7.5. billion, up 21% year over year and 8% sequentially from the fourth quarter.
“Europe’s combined market has grown steadily 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 towards the end of last year, but has since rebounded to levels we saw in the first half of 2021.”
Regional demand for cloud-based services (XaaS) continues to accelerate. ACV grew 44% to a record US$3.9 billion in the first quarter, and now represents 51% of the combined market, the highest proportion ever. This is the third consecutive quarter that the region has seen XaaS growth of more than 40%.
In the XaaS segment, infrastructure-as-a-service (IaaS) ACV soared 58% to a record US$2.9 billion in the quarter. Software as a service (SaaS) grew 15% to US$1 billion, but fell 2% from a record fourth quarter.
Managed services ACV, meanwhile, increased 3% to US$3.7 billion. It was the sixth consecutive quarter that this segment exceeded US$3.4 billion in VGG, the longest period of sustained strong demand ever recorded by the ISG index.
Within managed services, IT outsourcing (ITO) fell 11% year-over-year to US$2.7 billion, with sequential declines in financial services and energy, this last in the context of a slowdown in the oil and gas sector. Business process outsourcing (BPO) soared 84% to US$971 million, driven by strong demand across all sectors and a mega-deal in the media and communications sector. Industry-specific BPO solutions in the financial services and utilities sectors accounted for more than 30% of ACV growth in the quarter.
A record 256 managed services contracts were awarded in the first quarter, up 15% from last year and 25% from the fourth quarter. New reach rewards dominated, with 176 such deals in the quarter valued at US$2.3 billion. It was the sixth consecutive quarter that ACV’s new reach exceeded US$2 billion, a streak not seen in the past 10 years. The trend of smaller deals continued, with a record 151 deals in the US$5-10 million range, the smallest range 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 of the last four. First-quarter ACV was US$1.1 billion, up 27% from a year earlier. The Nordic countries (+26%) and Southern Europe (+93%) also contributed to the region’s growth.
DACH and France continued a recovery that began in the second quarter of 2021. Although both markets were down from a strong first quarter last year, DACH’s first quarter ACV of 823 million US$, increased 33% sequentially from the fourth quarter, while France’s CAV of US$502 million, although down slightly from the prior quarter, was the fourth time in the five quarters that CAV exceeded US$500 million.
Global Forecast 2022
ISG expects the global cloud-based XaaS (IaaS and SaaS) market to grow 22% for the year, up from 20% last quarter, while the global managed services market is expected to grow 5.1%, unchanged compared to last year. quarterly forecast.
About the ISG™ Index
The ISG Index™ is recognized as the authoritative source for market 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, corporate 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 market as a service, measuring the significant impact of cloud-based services on business digital transformation. ISG also provides ongoing analysis of automation and other digital technologies in its quarterly ISG Index presentations.
For more information on the ISG index, visit this Web page.
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and consulting company. A trusted business partner to more than 800 customers, including more than 75 of the world’s 100 largest enterprises, ISG is committed to helping enterprises, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The company specializes in digital transformation services, including automation, cloud, and data analytics; procurement advice; governance and risk management managed services; network operator services; design of strategy and operations; change management; business intelligence and technology research and analysis. Founded in 2006 and headquartered in Stamford, Connecticut, 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 expertise in industry and technology and its world-class expertise. research and analysis capabilities based on the most comprehensive market data in the industry. For more information, visit www.isg-one.com.
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Will Thoretz, ISG
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Kate Hartley, Carrot Communications for ISG