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Traditional outsourcing boosts overall spending in first half of 2017

Spending on traditional IT services contracts by Emea organisations increases in the first six months of 2017

Organisations in Europe, the Middle East and Africa (Emea) spent €6.3bn on IT outsourcing during the first six months of 2017 as high value traditional deals increased, according to research.

Traditional outsourcing deals – where a supplier takes on responsibility for an IT service and brings its own people in to run it, or develops and supports software – account for a high proportion of total spend, meaning any increase boosts the market.

According to ISG’s research of contracts worth more than €4m, the second quarter of this year saw the second-most traditional outsourcing deals signed in a single three month period, reaching 188, with the value of these contracts increasing 5% to €2bn.

Meanwhile, spending on the smaller infrastructure-as-a-service (IaaS) and software-as-a-service (SaaS) contracts increased 40%. These as-a-service contracts accounted for almost 30% of total outsourcing spending in the first six months of this year.

The financial services sector in Emea, the region’s biggest spender on IT services, increased its spending by 31% in the six months to the end of June. The energy sector increased spending by 44% during the period compared with 2016, but the manufacturing sector reduced its overall spending by 26%.

Barry Matthews, partner at ISG, said traditional sourcing continues to account for the lion’s share of contracting in Emea. “But the as-a-service segment is growing, albeit at a less aggressive rate than we have seen in the Americas and Asia-Pacific regions,” he said, adding that ISG expects strong growth through the rest of 2017.

“Traditional sourcing spend [is expected to grow] a mid-single-digit percentage for the year, while as-a-service spending is expected to remain fairly flat,” he said.

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