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Outsourcing market suffering Brexit impact

Deals in the UK have been smaller than elsewhere in EMEA as customers look to trim back spending ahead of uncertain economic times

The signs that Brexit is taking a toll on investment decisions continues to mount up with evidence emerging that outsourcing contracts in the UK have been impacted by uncertainty over the future.

The alarm has already been sounded about the prospects of Brexit hitting enterprise investment plans and the prospect of it making life more difficult for those that provide application development services across Europe and the prospects for distribution. Adding to that are comments from the Information Services Group (ISG) around the state of the outsourcing market.

The group found that sourcing values in the UK had 'plummeted' as Brexit got closer and it had been a shadow on an otherwise decent set of numbers.

Overall the sourcing market on EMEA increased in Q3 with the market for commercial outsourced contracts growing year-on-year by 56%.

Traditional sourcing grew 55%, reaching to €2bn and Infrastructure-as-a-Service (IaaS) and Software-as-a-Service (SaaS) hit record levels of €2.7bn and €0.9bn, respectively.

Before the Brexit vote the UK market achieved traditional sourcing average contract values of €800m plus in two to three quarters each year. Since the referendum that had only happened once and the deals that were being struck were smaller in size.

“The traditional sourcing market in the UK is showing clear signs of caution as the Brexit deadline approaches. Despite a high level of activity in the market, deal sizes are smaller," said Steven Hall, partner and president at ISG.

"However, the strong shift to as-a-service sourcing indicates that UK companies, and others across Europe, are recognizing the value in remaining agile to help them adapt to uncertain political and economic factors. Despite that uncertainty, we expect EMEA to contribute to the full-year growth we forecast for the global industry: IaaS up more than 30%, including more than 45% growth in public cloud; SaaS up 17%, and traditional sourcing up in the range of 4%,” he added.

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