The growing adoption of cloud-based services is propelling the expansion of the European IT and business services market, with the region setting a new second-quarter spending as a service record, according to the latest industry report. ISG report.
The EMEA ISG Index, which measures business outsourcing contracts with an annual contract value (ACV) of $ 5 million or more, shows that ACV for the combined market, which includes both services as that service and managed services, reached $ 6.3 billion, up 31% from a weak quarter last year at the start of the pandemic, and up 4% from the first quarter of 2021.
This was the third quarter in a row that the market’s combined CVA surpassed the $ 6 billion mark, this quarter nearly equaling the record set in the fourth quarter of last year.
Soaring adoption of cloud-based services
Cloud-based spend as a service has climbed 41% year-over-year and 15% since Q1 to a record $ 2.9 billion, and now accounts for 46% of the combined market , a record.
“Europe has traditionally lagged behind other regions in its adoption of cloud-based services, but now growth is accelerating,” said Steven hall, President of ISG EMEA. “COVIDCloud-related digital transformation has advanced cloud adoption by three to five years, and LCA as a service will soon exceed 50% of the market. We are near a point of no return.
In the as-a-service segment, the infrastructure as-a-service (IaaS) climbed 47% (18% quarter over quarter), to a record $ 2.2 billion, while Software as a Service (SaaS) increased 27% (5% quarter over quarter) to a record $ 722 million.
Managed services, at $ 3.4 billion, were down 4% quarter-over-quarter, their second consecutive quarterly decline, although they were up 23% from the weak second quarter of one year ago. Trading activity for the quarter hit a record 217 contracts, amid a wave of mid-range deals between $ 20 million and $ 40 million. IT Outsourcing (ITO) generated $ 2.8 billion in LCA, up 18%, and business process outsourcing (BPO) generated $ 611 million in LCA, up 54% .
For the first half of 2021, the combined market generated a record $ 12.3 billion in LCA, up 25%. Services as a service, at a record $ 5.4 billion, increased 27%, and managed services, at a record $ 6.9 billion, increased 23%. As a service, IaaS hit a record high of $ 4.0 billion, up 33%, and SaaS hit a record high of $ 1.4 billion, up 13%.
On the managed services side, ITO hit a record $ 5.8 billion, up 18%, from a record 353 transactions, with strength in ADM and infrastructure. BPO reached $ 1.1 billion, up 60%, driven by demand for financial, accounting and engineering services.
Transaction activity
Among the major ITO awards in the second quarter, HCL won a contract with a multinational oil and gas company for IT services to end users. TietoEVRY also won a € 200 million three-year contract with DNB Bank in Norway.
In BPO, notable deals this quarter included Cognizant’s deal with a UK automotive, distribution and retail company to transform its financial and accounting infrastructure, and Capita’s customer management deal. with Tesco Mobile. ISS Group has signed a two-year contract extension with Rolls Royce.
In IaaS, GCP signed a major agreement with LVMH this quarter to develop new cloud-based AI and machine learning solutions. And AWS has signed a contract with Ferrari to become its official provider of cloud, machine learning and AI.
In SaaS, Microsoft has secured Dynamics 365 contracts with ABN AMRO Bank and BMW, and signed Power BI agreements with Daimler, AB InBev, Dentsu and Swiss Re. Sanofi has signed with Microsoft to use Teams.
Market Snapshot
Among the geographic markets for managed services in the second quarter, France saw the strongest growth, up 44% year-over-year to $ 295.5 million in LCA. The UK and Ireland, the region’s largest managed services market in the second quarter, at $ 1.2 billion, were up 33% from the previous year.
The DACH market, meanwhile, generated $ 806 million in LCA from managed services in the second quarter, up 17% from the previous year, and the Nordic countries generated $ 405 million in LCA. , up 15%.
Only the Benelux and Southern Europe recorded a decrease in LCA of managed services compared to last year.
Global Forecasts 2021
The market for cloud-based services (IaaS and SaaS) is expected to grow 21% globally in 2021, compared to 18% expected last quarter. The company is also raising its forecast for managed services growth to 9%, from 5% previously.
