Large Contracts and France Drive Growth in EMEA Outsourcing Market

PRESS RELEASE: A growing number of large contracts, including a rise in mega relationships, along with increased activity in France, combined to drive 7 percent growth in the Europe, Middle East & Africa (EMEA) outsourcing market in 2014, according to Information Services Group (ISG) (NASDAQ:III), a leading technology insights, market intelligence and advisory services company.

The Q4 2014 EMEA ISG Outsourcing Index, which measures commercial outsourcing contracts with an annual contract value (ACV) of €4 million or more, found that a robust final quarter contributed to the region’s best year since 2011 and tied for the second strongest year of the last decade. ACV reached €9.5 billion for the year, up from €8.9 billion in 2013, although contract counts remained static (588 in 2014 vs. 595 in 2013).

EMEA’s growth was underpinned by activity in the region’s fourth largest market, France, where year-on-year growth reached 125 percent. In addition, the number of mega relationships, contracts with an annual contract value of €80 million or more, grew by 25 percent.

EMEA’s market growth was reflected at a global level as 2014 ACV reached €18.5 billion, up 16 percent, while contract counts edged up 4 percent, to 1,218, the second-highest level ever.

Commenting on the findings, John Keppel, partner and president, ISG, said, “A strong 2014 helped the EMEA market retain its position at the largest outsourcing region globally. The ACV of new scope and restructured contracts each delivered small gains, aided by the award of 20 mega-relationships across the region. It is encouraging to see more sustained outsourcing activity across the region rather than simply in the more mature markets.”

ACV for ITO rose 13 percent in 2014 and the 452 ITO contracts signed in EMEA for the year was the highest ever recorded in the region. Infrastructure deals drove the market, fuelled by some particularly large deals, including IBM’s deals with ABN Amro and Lufthansa.

In contrast, BPO ACV continued to shrink, falling for the second year, this time by 12 percent. The number of awards dropped by more than 25 percent, and in both value and number of deals, BPO hit its lowest point since 2010.

By industry, Manufacturing and Energy both saw ACV increases of nearly 30 percent for the year while Transportation increased by 13 percent. EMEA’s largest sector, Financial Services, fell by 20 percent in ACV in 2014 – its lowest performance in the past five years, in part as a result of a drop in contract activity and renewed pressure on prices in the market.

John Keppel added, “Looking ahead, we expect healthy numbers in 2015, though growth during the first half of the year will look flat at best. The first two quarters of 2014 were particularly strong and so the first half of 2015 may look tepid by comparison.”

At a regional level, the United Kingdom saw double digit (11 percent) growth as ACV grew from €3 billion to €3.4 billion, despite an 11 percent fall in contract count. The award of larger contracts and the nine mega-relationship signed drove the market growth.

ISG presented the Q4 2014 EMEA ISG Outsourcing Index during a conference call for media and analysts. To listen to an audio replay of the call and view presentation slides, please visit: http://www.isg-one.com/web/research-insights/isg-outsourcing-index/

About the ISG Outsourcing Index

Now in its 49th consecutive quarter, the ISG Outsourcing Index provides a quarterly review of the latest sourcing industry data and trends for clients, service providers, analysts and the media. For more than a decade, it has been the authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider performance.

About Information Services Group

Information Services Group (ISG) (NASDAQ: III) is a leading technology insights, market intelligence and advisory services company, serving more than 500 clients around the world to help them achieve operational excellence. ISG supports private and public sector organizations to transform and optimize their operational environments through research, benchmarking, consulting and managed services, with a focus on information technology, business process transformation, program management services and enterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, the deepest data source in the industry, and more than five decades of experience and global leadership in information and advisory services. Based in Stamford, Conn., the company has more than 850 employees and operates in 21 countries.