A surge in outsourcing in the UK has helped drive up the value of deals in the Europe, the Middle East and Africa (EMEA) by 23 per cent.
According to Information Services Group’s (ISG) Q2 EMEA Outsourcing Index, 169 contracts, valued at €2.2 billion (£1.5 billion), were awarded in the EMEA in the past three months, up by a third compared with the previous quarter.
Although the overall figure for annual contract value (ACV) was down 12 per cent on the same period last year, the UK saw an increase of nearly 150 per cent year-on-year, in both ACV and number of contracts. The financial services and energy sectors had a positive first half, while the manufacturing, transportation and telecoms sectors experienced a decline in contracting activity.
ISG said new scope awards in EMEA (211 contracts) accounted for a high proportion of the value in the first half of this year, although these were down 20 per cent compared with 2014.
Overall, business process outsourcing values remained flat at around €900 million (£632 million), while IT outsourcing, with deals valued at €3.2 billion (£2.2 billion), dropped 25 per cent from €4.3 billion (£3 billion) last year. Only two contracts valued at €80 million (£56 million) or greater were done in the region during the quarter, indicating a market shift towards a higher number of smaller deals, the report concluded.
John Keppel, partner and president, ISG Europe, said: "The outsourcing market has shifted significantly in recent years to higher numbers of contract awards at lower ACV levels. To put this into context, the €5.7 billion (£4 billion) in ACV awarded in EMEA during the first half of 2008 just before the recession hit, came from 199 contracts. The €4.1 billion (£2.9 billion) in the first half of this year came from 293 awards, aptly illustrating the shift to a greater number of smaller contracts in the marketplace today.”
Keppel said the shift was driven by more multi-sourcing, as buyers sought shorter and smaller contracts with niche providers that provided specialised services.
Buyers were also avoiding larger, longer-term contracts as they planned digital strategies amid a wave of new technologies and operating models, he said.