Outsourcing activity in the Europe, Middle East and Africa held steady in the third quarter, despite increase in contract volume, Information Services Group said citing findings of its latest EMEA ISG Outsourcing Index. ISG said the trend underscore a continuing trend toward smaller deal sizes.
The EMEA ISG Outsourcing Index measures commercial outsourcing contracts with an annual contract value of €4 million or more.
In the third quarter, the ACV was €2.1 billion, which is even with the previous year. At the same time, the number of contracts signed in the quarter rose 7 percent, to 139.
However, ACV declined 5 percent and contract counts were down 16 percent compared with the second quarter of 2015.
ISG said the slower pace of contracting in the third quarter may reflect economic caution across Europe as a result of the Eurozone debt crisis.
The first three quarters of 2015 saw a record number of small deals with ACV of between €4 and €8 million, marking a clear shift to a higher number of lower-value transactions.
“The market trend continues to shift toward smaller deals, as enterprises buy more specialized services from smaller, niche providers, and look to maintain the flexibility they need to take advantage of fast-changing technologies, lower pricing and evolving operating models,” said John Keppel, partner and president, ISG North Europe.
Further, the report showed the fall in large awards in 2015 has affected ITO in particular, which has seen a 28 percent drop in ACV year to date, to €4.5 billion, the lowest level since 2009.
In contrast, BPO was up 50 percent for the first nine months, compared with the especially slow year-to-date period in 2014. The number of contracts signed grew by 22 percent with much of the contracting activity taking place in the Contact Center and Facilities Management arenas.
“A third-quarter lull is not inconsistent with previous years,” said Keppel. “Despite the effects of economic concern and political change, a large amount of lesser-value deals and robust activity in a number of markets and industries kept total ACV up in the region.”
By market, the United Kingdom saw ACV fall 35 percent in the third quarter, largely driven by the absence of large deals in the market. France continued its return to more traditional levels after an exceptional 2014.
Two markets, DACH and Benelux, saw gains in ACV, which can be attributed in part to large contract awards. By sector, Financial Services had a standout quarter, with several large awards leading to a 35 percent increase in ACV, while counts increased by 10 percent. Healthcare also posted gains, with the help of two large awards.
Arya MM
