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Outsourcing market shows growth through first quarter

Analysis of the EMEA market from ISG has highlighted growth in the UK as more customers look for managed services to solve their IT needs

Increased customer demand for cloud services has helped the MSP market enjoy a decent first quarter.

Figures from the EMEA ISG Index, which tracks commercial outsourcing contracts with an annual contract value of $5m or more, showed that the sector, which includes as-a-service and managed services, reached $6bn, a 20% year-on-year improvement.

Cloud-based as a service deals were up by 16% year with IaaS a hot spot in that segment. SaaS also benefited from the increased demand with deals on that front also improving by 9% year-on-year.

On the managed services front Q1 came on the back of a strong Q4 with ACV values up by 23% as customers reached out for both business process and general IT outsourcing. ISG noted that there was a decent performance in the UK market, along with France and DACH.

Managed services ACV in the UK reached $866m, a 20% percent climb over 2020. It marked the fourth consecutive quarter that the managed services deals came in above the $800m mark.

Despite all the talk of growth there is still some way for the UK managed services market to get back to the levels it enjoyed in 2017, when £1bn quarters were a regular occurrence. ISG hinted that the onset after that point of Brexit uncertainty was largely to blame for the changes in the market.

“EMEA has produced two consecutive quarters with US $6bn or more of ACV, adding more than US $1.4bn from its pandemic low,” said Steve Hall, president, ISG EMEA. “Importantly, the region is seeing strength in both the as-a-service segment, as more and more enterprises adopt a public or hybrid cloud strategy, and on the managed services side, which is experiencing a resurgence.”

Significant deals

There were some significant deals signed in Q1 and those also contributed to the feel good factor. “That brings the total to eight mega-deals over the last two quarters; you have to go back to early 2017 to find a two-quarter period in EMEA that had more mega-deals awarded,” he added.

In terms of looking ahead, ISG is forecasting that the global market for cloud-based services (IaaS and SaaS) will grow 18% this year, slightly down from the 20% that had been forecast at the start of the year – but managed services is expected to be 5%, which has been upgraded from a previously forecast 3%.

Read more on Managed IT Services

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