The outsourcing market in Europe Middle East and Africa has slumped in the first quarter of 2018 as businesses scramble to prepare for the new EU General Data Protection Regulations (GDPR), according to a report.
Information Services Group (ISG) said in its 1Q18 EMEA Index that European businesses were focusing attention and discretionary spending on the GDPR regulations, which will take effect on May 25.
“There is a degree of uncertainty in the European market that continues to depress demand for outsourcing,” said Steve Hall, partner and president, ISG EMEA.
“The focus on preparations for the sweeping GDPR data-privacy regulation and the impact this will have on business relationships is front of mind for many organisations and has led to a shift in priorities.”
Hall cited the recent demise of Carillion and financial uncertainty surrounding several high profile outsourcing companies as adding a new degree of caution to the market.
The index measures commercial outsourcing contracts with an annual contract value (ACV) of €4m or more. Analysis reveals that the EMEA region’s first quarter combined market ACV of €3bn was down 20% compared to the same period last year.
ISG attributed the decline to a sharp fall in traditional sourcing values.
While there was just a 3% drop in the number of contracts signed in the first quarter of 2017, values dropped by 40%.
However, while traditional outsourcing has fallen, sourcing as-a-service has soared, rising by 40% over the last year. As-a-service ACV reached €1.4bn in 2017 and represented 46% of the combined regional market.
According to the report the increase in as-a-service sourcing was driven by demand for infrastructure as-a-service, which increased 48% over the previous 12 months.
Overall growth worldwide in the as-a-service sector has helped the global combined market reach a record high of €9.8bn in the first quarter of 2018.
Looking ahead, Hall said he was optimistic for the as-a-service segment.
“While traditional sourcing may have a bumpy ride in coming quarters, the trend towards as-a-service will continue to accelerate across Europe through 2018,” he said.
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