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Outsourced IT and business services hit record levels in 2021

Spending on IT and business process outsourcing services in Europe hits highest ever level in 2021, with cloud service spending continuing to grow rapidly

Organisations across Europe spent $26.5bn (£19bn) on IT and business services in 2021, the highest annual spend ever recorded by tech advisory the Information Services Group (ISG).

Cloud-based services continued to close the gap on traditional IT outsourcing – managed services – with another quarter of significant growth.

ISG reported a 23% increase in sales compared with the previous year, with as-a-service contracts increasing in value by 41%, to reach $12.6bn, and traditional outsourcing sales 11% up, to $13.9bn. Business process outsourcing (BPO) deals were up 45% in terms of value, reaching $2.6bn.

The report, which records contracts worth $5m or more, revealed that the UK saw an overall increase of 2% in the total value of contracts in 2021, compared with 2020, reaching $3.6bn.

Meanwhile, following a 70% fall in spending in the final quarter, the market in Germany, Austria and Switzerland (DACH) saw a 29% fall in total spending in 2021, compared with 2020, at $3bn.

“DACH was impacted by supply chain disruptions and a slowdown in global consumer spending, which led to an extension of existing scope and a pause in larger transformation deals,” said Steve Hall, president of ISG in Europe.

Meanwhile, Europe’s third biggest economy, France, recorded an 82% spending increase for the year after posting four straight quarters of year-on-year growth, taking it to $2.2bn.

“Despite signs of a slowdown last quarter, Europe appears to be on a solid upward trajectory overall,” said Hall. “Combined contract value has stayed above $5bn per quarter since mid-2020, including four consecutive $6bn quarters and the latest quarter topping $7bn.”

Globally, ISG expects cloud services spending to increase by 20% in 2022, compared with last year, and traditional IT outsourcing to increase by just over 5%.

Spending this year is expected to be fuelled by renewals to expiring contracts, with contracts with a combined value of $18.5bn due to expire in 2022. ISG said there was a trend for renewals to go to existing suppliers, but with enterprise customers requesting additional services.

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