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Demand for cloud services drives increase in IT outsourcing

Cloud services spending in Europe, the Middle East and Africa offset a drop in traditional IT outsourcing in 2017

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Organisations in Europe, the Middle East and Africa (Emea) increased their IT outsourcing outlay in 2017, with a sharp increase in spending on cloud-based services offsetting a steep decline in the value of traditional outsourcing contracts signed.

According to figures from ISG, which measures IT and business process outsourcing contracts worth €4m or more, contracts worth a total of €12.2bn were signed across the Emea region last year. Cloud-based services were up by 41% on 2016, reaching €3.9bn, but the total value of traditional IT outsourcing contracts fell by 8% to €8.3bn.

The biggest component of the cloud services share was taken by infrastructure-as-a-service (IaaS) contracts, which reached €3bn after a 58% increase in spending. Software-as-a-service (SaaS) spending remained about the same in 2017 as in the previous year, at €900m.

The fourth quarter of 2017 saw a record €1.1bn spent on cloud services, 27% higher than the previous year. This move to cloud services was characterised by more, smaller deals.

Read more about Emea IT outsourcing spending

Steven Hall, partner and president at ISG, said despite a dip in the third quarter, the market recovered with a steady performance in 2017 as a whole. He said the adoption of cloud services was positive after slow starts in previous years.

“European businesses are seeing the potential of new technologies to help them on their digital transformation journeys, while reducing costs and improving agility. Macroeconomic uncertainty across Europe makes the business of predictions tricky. Nonetheless, the trend towards ‘as a service’ is one we can expect to see accelerating over the next 12 months, with consistent growth of 20% or higher for the as-a-service market,” said Hall.

In the UK, organisations spent €3.2bn on 206 contracts in 2017, some 18% higher than in 2016 when the UK had its lowest spend in a decade.

Globally, a new record for spending was set at €34.6bn. Cloud services overtook traditional outsourcing in the Americas and Asia-Pacific in the fourth quarter, in terms of spending.

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