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Demand for cloud services drives managed services growth

Europe’s IT and business services market had a strong start to 2022, with record first-quarter demand for cloud-based services and continuing momentum in managed services, according to the latest report from Information Services Group (ISG).

The EMEA ISG Index, which measures commercial outsourcing contracts with an annual contract value (ACV) of $5 million or more, shows that ACV for the combined market exceeded $7 billion for the first time in a quarter, coming in at a record $7.5 billion, up 21% year over year and up 8% sequentially from the fourth quarter.

The UK market continued its strong, post-Brexit recovery, exceeding $1 billion in managed services ACV for the second quarter in a row and the third quarter in the last four. First-quarter ACV was $1.1 billion, 27% higher than the prior year.

Steve Hall, President of ISG EMEA, said: “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. Growth slowed toward the end of last year but has since bounced back to the levels we saw in the first half of 2021.”

EMEA demand for cloud-based services (XaaS) continues to accelerate, with ACV rising 44% to a record $3.9 billion in the first quarter. Following the third straight quarter of 40%+ growth, XaaS now accounts for 51% of the combined market, the highest proportion ever.

Within the XaaS segment, infrastructure-as-a-service (IaaS) ACV soared 58% to a record $2.9 billion in the quarter. Software-as-Service (SaaS) advanced 15% to $1 billion, but was 2% off the record fourth quarter.

Managed services ACV recorded a sixth straight quarter of sustained high demand, rising 3% to $3.7 billion, with a record 256 managed services contracts awarded in the first quarter, up 15% on last year and up 25% compared to the fourth quarter. The trend toward smaller contracts continued, with a record 151 deals in the $5 million to $10 million range, the smallest band measured by the ISG Index.

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