If you’d like to read this on the web, click here, and if someone forwarded you this briefing, consider subscribing here.
EMEA
IT and business process outsourcing contract value surged in EMEA in 2Q23, surpassing the Americas for the first time since 2020.
DATA WATCH
Background
As we recently discussed on the 2Q23 Index Call (PDF), the IT and business services industry generated over $10 billion of managed services annual contract value for the first time ever. And much of that record setting growth came from the EMEA region. European enterprises were laser focused on cost optimization in the second quarter, in response to high inflation and elevated energy costs, which continue to put pressure on consumer spending.
The lion’s share of this cost-optimization led bookings growth came from the UK and DACH regions, and from five mega awards.
The Details
- EMEA annual contract value of $4.5 billion was up 15% Y/Y
- The UK region was up 50% Y/Y, and the DACH region was up 16% Y/Y
- There were five mega awards in the second quarter, with a combined value of over $1 billion
What’s Next
This is only the second time since the second quarter of 2020 that EMEA generated more IT services contract value than the Americas, so it’s an important inflection point in the industry.
However, there were really two factors that led to this. First, the five mega awards. The EMEA region averages around three mega awards each quarter, so five is a lot. In fact, it’s the most since the second quarter of 2022.
Second, ACV in the Americas was down almost 7% Y/Y. But that decline was almost exclusively due to weakness in the banking sector, which was down 21% Y/Y.
So, what does this mean for the IT and business services sector in EMEA in the second half of 2023? We’re continuing to see strong demand and solid pipelines, but it’s important to remember that the third quarter in EMEA is typically soft, given the summer holiday season.
However, it’s our view that Europe should continue to outpace global growth, which is one of the primary reasons that we’re holding our global market forecast at 5%.
About the authors
Stanton Jones
Stanton leads ISG's Index research, helping providers, investors and ISG clients make sense of the global IT services sector. Stanton’s weekly newsletter, the Index Insider, is read by thousands of market stakeholders each week. An ISG Digital Fellow, Stanton has been quoted in Fast Company, Forbes and CIO.com, and has appeared on national cable news.
Steve Hall
As the leader of ISG’s business in EMEA and an Executive Board Member, Steve provides strategic insight and advice to help ISG’s clients solve their most critical business challenges, helping them adopt and optimize the technology and operating models they need to compete successfully. In particular, he uses his long experience and broad expertise to challenge and inspire them to think about their risks and opportunities in new and unexpected ways.
Past achievements for clients
Steve leads his team’s engagement with clients with an industry-recognized and highly valued perspective on the most important trends in business and technology. He asks and answers the big questions: Why do you need to transform? What’s your best way forward? What do you need to accelerate? And where should you invest your technology dollars to make it all happen?
Among his many client success stories, his ability to take in the big picture, define the problem and connect the dots to the right solutions helped one legacy postal and shipping giant transform itself into a modern logistics powerhouse. He also guided a global energy industry leader through a complex operating model and IT provider transition, helping them see past the obvious cost cutting measures to identify the root causes of their challenges—and delivering savings far beyond what they had imagined.
