The traditional sourcing market in 2018 contracted by 27% in the UK and by 6% in EMEA, as political and economic uncertainty, including Brexit, undermined business confidence.
Analysis by Information Services Group (ISG) shows that the UK’s traditional sourcing market has slumped since the Brexit vote. Before June 2016, there were an average of three €800 million quarters for traditional sourcing every year. Since the vote, there has been just one (Q1 2017).
However, the latest EMEA ISG Index shows that the decline in traditional sourcing has been more than offset by a 48% increase in as-a-service annual contract value (ACV) in EMEA, leading to overall market growth of 9% in 2018.
The rise in cloud services and as-a-service sourcing – which now accounts for 38% of total ACV for EMEA – continues to be driven by strong demand for Infrastructure-as-a-Service (IaaS) and Software-as-a-Service (SaaS), both of which grew by more than 40% in 2018.
Steve Hall, partner and president of ISG, expects demand for IaaS and SaaS to remain strong as enterprises continue to prioritise digital transformation.
He said: “Despite ongoing political and economic uncertainty in Europe and resulting business caution, companies are making significant investment in digital technologies to improve their ability to compete and to engage with their customers. This is a clear testament that the tailwinds of digital transformation are stronger than the headwinds of political and economic issues.
“We believe the industry will see an accelerating growth trend in 2019, driven by a growing appetite for digital transformation, even in the face of unforeseen macro-economic challenges.”
Even though traditional sourcing declined in the UK, DACH region and France, there were increases in other parts of EMEA, including the Nordics, which saw a 20% increase in traditional sourcing, Southern Europe, Africa/Middle East and Russia/Eastern Europe.
The EMEA ISG Index measures commercial outsourcing contracts with an annual contract value (ACV) of €4 million.