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The EMEA ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of US $5 million (£3.6 million) or more, shows ACV for the combined market, which includes both as-a-service and managed services, reached US $6.0 billion (£4.4 billion), up 20 percent year on year, but off 5 percent from a record fourth quarter.
Cloud-based as-a-service ACV reached a quarterly record of US $2.5 billion (£1.8 billion), up 16 percent versus the prior year. Within this segment, infrastructure-as-a-service (IaaS) climbed 19 percent, to a record US $1.8 billion (£1.3 billion), while software-as-a-service (SaaS) rose 9 percent, to a record US $658 million (£479 million).
Managed services, meanwhile, produced its second straight strong quarter, with ACV of US $3.5 billion (£2.5 billion), up 23 percent year on year, fueled by growth in both IT outsourcing (ITO) and business process outsourcing (BPO) and strong results in the UK, France and DACH. ITO was up 17 percent year on year, to US $3.0 billion (£2.2 billion), on strength in both ADM and infrastructure services, while BPO surged 66 percent, to US $521 million (£379 million), on strong demand for industry-specific, finance and accounting, and engineering and R&D services.
“EMEA has produced two consecutive quarters with US $6 billion (£4.4 billion) or more of ACV, adding more than US $1.4 billion (£1.0 billion) 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.”
Hall pointed out that three of the four mega-deals—those with ACV of US $100 million (£73 million) or more—in the first quarter were awarded in the EMEA region. “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.”
Among significant IT awards in the first quarter, Mphasis contracted with Ardonagh Group, the U.K. independent insurance broker, to support its digital transformation. On the infrastructure side, Atos won a large digital workplace contract with telecom company Wind Tre in Italy, and HCL inked a five-year digital workplace services agreement with Airbus, the European aerospace manufacturer.
Within the BPO space, KPIT signed significant engineering services deals with BMW and automotive technology company Veoneer to support work on autonomous driving and intelligent mobility. ISS Group, meanwhile, secured an eight-year extension with Barclays in the U.K. to provide integrated facility and workplace services across the bank’s operations in 30 countries.
With the automotive sector becoming a battleground for major public cloud providers, BMW Group announced it is migrating workloads to AWS, joining automakers Renault and Volkswagen on AWS. In the travel sector, ISG advised on one of the biggest cloud deals in the region this quarter with the signed agreement between global travel technology company Amadeus and Microsoft Azure.
In the SaaS segment, Microsoft signed deals this quarter with Daimler, GlaxoSmithKline and IKEA, while Oracle secured contracts with NatWest Group to standardize its various banks on Oracle Fusion in the cloud.
Market Insights
The DACH market generated more than US $1 billion (£728 million) of managed services ACV in the first quarter, up 13 percent over the prior year. It was the second consecutive quarter DACH ACV was above US $1 billion (£728 million) mark—about a third higher than its historic norm. DACH now accounts for nearly 30 percent of managed services ACV in the EMEA region.
Managed services ACV in the UK reached US $866 million (£630 million), up 20 percent over the prior year. It was the fourth consecutive quarter the UK generated managed services ACV in excess of US $800 million (£582 million), represented a sustained rebound for the market, but still below the US $1 billion (£728 million) quarters that were typical prior to 2017 and the onset of Brexit uncertainty.
France, meanwhile, had its best ACV quarter since 2014, with managed services ACV of US $595 million (£433 million), up nearly 2.5 times from US $243 million (£177 million) in the prior year, with nearly 40 deals reached in the quarter.
2021 Global Forecast
ISG is forecasting the global market for cloud-based services (IaaS and SaaS) will grow 18 percent in 2021, down slightly from its 20 percent forecast at the start of the year. ISG, meanwhile, has raised its growth forecast for managed services to 5 percent, up from 3 percent at the start of the year.
