UK shines as EMEA outsourcing market explodes

Mega-deals proliferate as demand for IT outsourcing continues to snowball

The EMEA market for enormous outsourcing contracts showed no signs of slowing down in 2011's closing quarter.

Numbers released today by Information Services Group (ISG) revealed that the Q4 regional market for outsourcing contracts valued at more than €20m was worth $13.4bn (£11.2bn). This represents year-on-year market growth of 17 per cent.

The UK was singled out as a high-growth area, with demand in the private sector reigniting during the quarter. The number of contracts signed rose 15 per cent annually and total contract value (TCV) grew 40 per cent.

Of the five so-called mega-deals – worth north of €800m – that closed globally in Q4, four were in EMEA. Across the whole of last year, the EMEA market for €20m-plus outsourcing deals was worth €44bn, some 60 per cent of the worldwide total. Eight of the ten mega-deals of 2011 were signed in EMEA.

The IT outsourcing market continues to grow strongly across the region and is now worth €31bn annually. All key verticals reported strong demand, with the outsourcing markets for both the manufacturing and financial services sectors worth more than $13bn last year.

Duncan Aitchison, president, north Europe at ISG, predicted that contract volumes are likely to hold up this year but the wealth of mega-deals inked in 2011 may mean TCV shrinks in 2012.

He warned that continued financial volatility in the region could also affect the market. The way contracts are structured could also change dramatically, as more end users move towards pay-per-use models, predicted Aitchison.

"As we go through 2012, we expect buyers will increasingly realise the promise of utility pricing, where they pay based on their consumption of IT resources," he said.

"Despite the hype and expectations set around cloud and utility computing, there has been relatively little change to date in the structure of outsourcing contracts. Looking ahead, we believe that far more business will be written using new pricing dynamics by vendors aggressively offering true pay-by-the-drink pricing."