The traditional outsourcing market in EMEA has slumped to its worst quarter for seven years as large deals and contract restructurings dried up in the three months to 30 June.
That's according to market analyst ISG, which measures commercial outsourcing contracts with an annual contract value (ACV) of €4m (£3.4m) or more.
Traditional sourcing deals across the region nose-dived 28 per cent year on year to €1.6bn, the lowest ACV in seven years, ISG said. It attributed this to a lack of large awards and a "noticeable pullback in contract restructurings".
The as-a-service market in EMEA, in contrast, rose 38 per cent to €600m, ISG said. Factoring that in, the total outsourcing market fell by a more modest 18 per cent to €2.2bn, according to ISG's figures.
The as-a-service segment will continue to see "accelerated" growth in the coming months and years, both globally and in EMEA, as clients draw on increased automation and continue to shift operations to the cloud, ISG said.
"EMEA's traditional sourcing markets pulled back in the second quarter and came in at lower levels than projected, due to a lack of large deals and restructurings, and alongside some challenging macroeconomic factors within the EU," said ISG president John Keppel (pictured).
"These factors, and notably the result of the UK referendum on EU membership, will continue to have an impact, although it is too soon to tell exactly what this will look like. We expect traditional market ACV for the year may come in slightly lower than 2015."
The Q2 slump comes after ISG hailed a "return to form" for outsourcing in Q1, when the EMEA market surged strongly on the back of feverish restructuring activity.
Adding the Q1 and Q2 figures together, the market was flat for the first half in EMEA, ISG said, although performances vary wildly between countries.
The Nordics, for instance, saw its ACV more than double year on year in the first half, with France also growing by a third. The UK and DACH regions were lacklustre, however, falling 11 per cent and 30 per cent year on year, respectively.
For DACH, ISG noted that large companies in the region were adopting a "characteristically cautious approach" to some of the newer transformational services in the market.
For the first half as a whole, the EMEA as-a-service market topped €1bn revenues for the first time as it bulged 38 per cent year on year, ISG added. IaaS rose 63 per cent and SaaS nine per cent, said the market watcher, whose figures broke out this sub-segment of the market for the first time.
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