The EMEA outsourcing market is shifting towards a higher number of smaller deals, driven by the increased use of multi-sourcing, according to Information Services Group (ISG).
The EMEA ISG Outsourcing Index has revealed that about 293 deals with an annual contract value (ACV) of €4.1bn were signed in the first half of this year, compared to 199 contracts with an ACV of €5.7bn that were inked in the first half of 2008, prior to the recession.
A quarterly record of 169 contracts valued at €2.2bn were awarded in the region in Q2, an increase of more than 23% by ACV when compared to Q1 and over one-third by number of contracts.
ISG North Europe partner and president John Keppel said customers are seeking shorter and smaller contracts with niche providers offering specialised services.
Keppel added that customers also avoiding larger, longer-term deals as they plan their digital strategies in the middle of a range of new technologies and operating models.
The influence of mega-relationships (contracts valued at €80m or more) did not affect the healthy level of contracting activity in Q2 with just two mega-relationships were signed in the region during the quarter.
According to ISG, BPO values remained flat at about €900m, while ITO, with deals valued at €3.2bn, fell 25% from the €4.3bn awarded in 2014.
Content from our partners
ISG said the UK provided a bright spot in the market, with ACV gains of about 150% year on year.
Activity levels and values in France were in line with usual first half totals despite year-on-year declines of 74% in ACV and 54% in contract counts.
DACH and Benelux saw gains in ACV. Eastern Europe had strong year-on-year growth in contract numbers and value, while the Nordics declined in both ACV and counts.
Keppel said: "The outsourcing industry is shifting significantly. More deals than ever are being signed at much lower contract values, driven by increased use of multi-sourcing and the impact of digital strategies." Keppel said.
"The ever-increasing activity levels in EMEA indicate that outsourcing is more popular than ever. The UK, DACH and the Financial Services and Energy sectors made significant contributions to the market, rebounding strongly in the second quarter following a lacklustre start to the year."
