The value of as-a-service sourcing contracts have reached an all-time high in EMEA, but a drop in traditional sourcing resulted in a weak quarter overall, according to research by Information Services Group (ISG).
The 3Q17 EMEA ISG Index released by ISG measures commercial sector outsourcing contracts with an annual contract value (ACV) of €4m (£3.5m) or more.
The index unveiled that the as-a-service sector continued its upward trajectory, soaring 48 per cent, to €1bn (£892m), as companies continue to seek cloud and digital solutions to improve operating efficiency and develop new growth opportunities.
This boost helped counter the significant shortfall in traditional sourcing, which slumped 43 per cent, to €1.3bn (£1.1bn), its lowest point in a decade.
The falloff in traditional sourcing, upon which EMEA depends more than other regions, caused combined ACV to drop 23 per cent, to €2.3bn (£2bn), due in part to a lack of large contracts in the quarter.
Barry Matthews, partner at ISG, said that despite a disappointing third quarter, the EMEA market year to date is showing modest growth, with record as-a-service contracting not quite able to counter the drop in traditional sourcing activity.
"Macroeconomic events in EMEA - the recent German election and continued uncertainty surrounding Brexit - continue to slow buying decisions.
"Nonetheless, as-a-service spending will continue to grow significantly through next year, as the imperative on businesses to find agile solutions to boost productivity and reduce costs continues," said Matthews.
Looking at traditional sourcing trends by geography, the UK, despite a weak third quarter, posted its strongest year-to-date performance in five years. UK ACV, at €2.5bn (£2.2bn), was up 15 percent year over year, while the number of contracts rose 13 per cent for the same period.
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