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EMEA sourcing market grows in 2018 as businesses embrace digital transformation

The sourcing market in Europe, Middle East and Africa (EMEA) grew in the final quarter of 2018 despite unsettling macro-economic and political events across the region, according to the findings of the latest report from global technology research and advisory firm, Information Services Group (ISG).

The EMEA ISG Index, which measures commercial outsourcing contracts with annual contract value (ACV) of €4 million or more, shows the EMEA market posted combined fourth-quarter ACV of €3.0 billion, an increase of five per cent from the previous year.

This rise was bolstered by a 44 per cent year-on-year increase in as-a-service ACV, to €1.3 billion, as strong demand for digital transformation remained an enterprise imperative. Infrastructure-as-a-Service (IaaS) and Software-as-a-Service (SaaS) in EMEA both performed strongly, posting ACV of €960 million and €331 million, respectively. Traditional sourcing, meanwhile, contracted by 12 per cent year-on-year to €1.7 billion.

For the full year, EMEA reached €12.9 billion in ACV, up nine per cent against 2017. Traditional sourcing ACV of €8 billion was down six per cent year-on-year, but as-a-service grew 48 per cent to reach €4.9 billion. The rise in as-a-service sourcing – which now accounts for 38 per cent of total ACV for EMEA – continued to be driven by demand for SaaS and IaaS, both of which increased by more than 40 per cent in 2018.

Steve Hall, Partner and President of ISG, said: “Despite ongoing political and economic uncertainty in Europe and resulting business caution, companies are making significant investment in digital technologies to improve their ability to compete and to engage with their customers. This is a clear testament that the tailwinds of digital transformation are stronger than the headwinds of political and economic issues.”

Globally, fourth-quarter ACV for the combined global market grew 18 per cent, to €9.8 billion. As-a-service ACV pushed to new highs in the fourth quarter, up 43 per cent year-on-year, while traditional sourcing inched up two per cent.

Looking ahead, Hall added: “Even though the macro environment is more volatile now than a year ago, demand for sourcing remains strong. We believe the industry will see an accelerating growth trend in 2019, driven by a growing appetite for digital transformation, even in the face of unforeseen macro-economic challenges.”

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