Information Services Group (ISG), a global technology research and advisory firm, has published a report on the European IT services market. The report shows that the sector is still growing strongly thanks to the increasing adoption of cloud-based services. The Europe Middle East Africa (EMEA) region set a new record for as-a-service spending in the second quarter.

Record second quarter for the European market thanks to increasing use of the cloud

The ISG Index for EMEA includes outsourcing contracts with an annual value (AUV) of at least €4.2 million in its statistics. For the second quarter of 2021, ISG shows that the combined annual value, which includes both as-a-service and managed services contracts, reached €5.3 billion.

This represents a 31% increase over a weak second quarter last year at the start of the pandemic and a 4% increase over the first quarter of 2021. This is the third consecutive quarter that the combined annual contract value (ACV) has exceeded the €5 billion mark, nearly matching the record set in Q4 2020.

Spending on cloud services increased 41% year-on-year, and 15% year-on-year, to a record €2.4 billion. It also represents 46% of the combined market, another record. Lyonel Roüast, Partner & President of ISG for EMEA commented on the growth of the European IT services market:

“Traditionally, Europe has lagged behind other regions in the adoption of cloud services, but now growth is accelerating. In the context of the Covid-19 pandemic, digital transformation has accelerated cloud adoption to 3-5 years ahead of its normal curve, and the ACV of as-a-service contracts will soon exceed 50% of the market. We are close to a pivotal moment.”

Second consecutive decline for managed services in contrast to the “as-a-service” market

Managed services, worth €2.9bn, are down 4% quarter-on-quarter, their second consecutive quarterly decline, although they are up 23% on Q2 2020. The number of deals closed in this quarter reached a record 217, with several having the average value between €16.9 million and €33.7 million.

IT outsourcing services (ITO) generated ACV of €2.4 billion, an increase of 18%. In the as-a-service market, the IaaS segment generated a record €3.4 billion (up 33%), and SaaS €1.2 billion (up 13%).

Which transaction activities were the most successful?

Here’s a non-exhaustive list of some of the major successes in the Q2 2021 market:

• ITO segment: HCL won a contract with a multinational oil & gas company for end-user IT services. TietoEVRY also won a three-year, 200 million euro contract with DNB bank in Norway.
• BPO sector: Cognizant has signed an agreement with a British company in the automotive, distribution and retail sector. Cognizant will be responsible for transforming its client’s finance and accounting infrastructure. Capita has also signed a customer management contract with Tesco Mobile for three years. ISS Group has also signed a two-year contract extension with Rolls Royce.
• IaaS segment: GCP signed a major contract with LVMH to develop new cloud-based AI and machine learning solutions. AWS also signed a contract with Ferrari to become its official cloud, machine learning and AI provider.
• SaaS segment: Microsoft won Dynamics 365 contracts with ABN AMRO Bank and BMW, and signed Power BI agreements with Daimler, AB InBev, Dentsu and Swiss Re. Sanofi signed with Microsoft to use Teams.

Situations in France, Southern Europe, Benelux, the British Isles and Scandinavia

Here is a detailed market-by-market situation in the Europe region:

• France saw the strongest growth in Q2 2021, up 44% year-on-year to ACV of €249 million.
• The UK and Ireland, meanwhile, was the largest managed services market in the
  973 million in the second quarter, and the figure was up 33% year-on-year.
• The contract value of the DACH managed services market reached 679 million euros in ACV, up 17% year-on-year, and the Nordics reached 341 million euros, up 15%.
• Only the Benelux and Southern Europe (especially the Iberian Peninsula) experienced a decrease in managed services ACV compared to last year.

For the year 2021, ISG expects the global cloud services market (IaaS and SaaS) to grow by 21% and despite a decline in the EMEA market, the firm believes the global managed services market will grow by 9%.

Translated from Croissance significative du marché européen des services IT lors du second trimestre 2021 grâce à l’utilisation du cloud