EMEA IT outsourcing feels the pinch in H1

ISG report shows high-end volumes and values in freefall

The EMEA market for big-ticket IT outsourcing deals shrank to its lowest level in five years in 2012's opening half, research from Information Services Group (ISG) has found.

The analyst's quarterly TPI Index, which tracks outsourcing deals worth upwards of €20m (£15.7m), finds that total contract value (TCV) across the region in Q2 fell 21 per cent annually to €6.7bn. The number of contracts awarded during the period stood at 65, a 29 per cent year-on-year decline.

Over the first six months of 2012 the value of IT outsourcing (ITO) deals has steadily declined, with total EMEA first-half TCV dropping 26 per cent annually to its lowest level in five years. Business process outsourcing (BPO) endured a 23 per cent drop in H1, but deal values were flat during a comparatively stable second quarter.

The UK market suffered in the year's opening half, with TCV dropping 12 per cent year on year to €5.7bn. Across the entire region, contracts from financial services and manufacturing remained the market's bread and butter in H1, having contributed deals worth a combined €5bn and €4bn respectively.

The tepid EMEA outsourcing market is attributed to the region's ongoing economic malaise and the uncertainty surrounding the future of the euro. Duncan Aitchison, EMEA partner at ISG, claimed that the ITO space is lagging behind the comparatively robust BPO segment.

"Despite being down on an annual basis, BPO values for the first half of 2012 have held up well against prior first-half averages, and BPO activity in EMEA remains buoyant," he said. "In ITO, the region will need considerable improvement in contracting activity to come close to equalling last year's outstanding results."