'Significant shift' in outsourcing towards smaller deals

Record number of deals recorded in EMEA in Q2 as customers move towards bitesize contracts

The EMEA outsourcing market is shifting towards a higher number of smaller deals, driven partly by increased use of multi-sourcing, according to market watcher ISG.

Some 293 deals with an annual contract value (ACV) of €4.1bn were signed in the first half of 2015, according to the EMEA ISG Outsourcing Index.

This contrasts with the 199 contracts with an ACV of €5.7bn that were inked in the first half of 2008, before the recession hit.

John Keppel, partner and president ISG Europe, said: "The outsourcing industry is shifting significantly. More deals than ever are being signed at much lower contract values, driven by increased use of multi-sourcing and the impact of digital strategies."

Customers are seeking shorter and smaller contracts with niche providers offering specialised services, Keppel explained.

They're also avoiding larger, longer-term contacts as they plan their digital strategies amid a "wave of new technologies and operating models," he added.

ISG only looks at commercial outsourcing contracts with an annual contract value (ACV) of €4 million or more.

In Q2, enterprises put pen to paper on 169 deals, a quarterly record and up more than a third on Q1.

But in value terms, it was a mixed picture. Those 169 deals had a total ACV of €2.2bn, 25 per cent up on Q1 but 12 per cent down on the same quarter in 2014.

The UK provided a "bright spot" in the market, with ACV gains of 150 per cent year on year.

"The ever-increasing activity levels in EMEA indicate that outsourcing is more popular than ever," said Keppel.

"The UK, DACH and the Financial Services and Energy sectors made significant contributions to the market, rebounding strongly in the second quarter following a lacklustre start to the year."