EMEA outsourcing market sees highest-ever Q3 activity
This week Information Services Group released data which found that the Europe, Middle East and Africa (EMEA) region experienced remarkably strong growth during the third quarter of 2013.
During this period, 176 contracts (with an annual contract value (ACV) of €4 million or more) were awarded; the highest number of contracts ever recorded in a single quarter. This represented a 60 per cent increase both quarter-on-quarter and year-on-year. Third quarter ACV of €2.8 billion was also up 16 per cent over last year and 89 per cent over the previous quarter.
A driving factor behind this impressive growth was the significant number of mega-relationships – outsourcing contracts with an ACV of over €80 million – awarded in the region in the quarter. Nine of the ten mega-relationships recorded globally were awarded in EMEA, confirming its place as the world’s biggest outsourcing market.
The real success story for this quarter took place in the IT outsourcing market. The 125 ITO contracts signed during the quarter were the most ever recorded in any quarter in EMEA, almost double the number awarded in the second quarter. The €2.3 billion awarded was the second highest ITO ACV to be recorded in a quarter, and was up 177 per cent over the relatively weak quarter that preceded it.
Conversely, the Business Process Outsourcing (BPO) market saw a dip in ACV in the third quarter, with the €500 million awarded, down 28 per cent both quarter-over-quarter and year-over-year. However, despite this dip in ACV, contracting activity rose. The 51 BPO contracts awarded were nine per cent up on last quarter and 70 per cent ahead of the same period last year.
By industry, ACV within the Financial Services sector increased dramatically quarter on quarter, as FS recorded its largest ever third-quarter result. Year-to-date only Manufacturing and Travel, Transport & Leisure (TTL) sectors exceeded 2012’s YTD totals; indeed TTL saw ACV rise by 88 per cent year-to-date, driven by an increase in contract activity. As a result of poor performance through the first half of 2013, other sectors struggled to meet the healthy contract values recorded YTD last year.
Germany led the region’s growth, surpassing the UK in ACV awarded for the first time, with €810 million in ACV. Despite this, the United Kingdom awards of €680 million were consistent with recent Q3 performances.
Most of the EMEA sub-regions recorded healthy increases of ACV year-over-year, with France, Southern Europe, the Nordics and Africa and the Middle East posting annual contract values ahead of those in the third quarter last year.
This quarter’s results indicate a rebound from the protracted global weakness experienced during the first half of the year, which is set to remain a drag on full-year ACV levels. This means that although we expect the year to finish strongly, as a whole it may be down on 2012. Despite this, these latest findings are a positive sign. Growth in the third quarter has been robust, and is set to continue through to the next quarter.
John Keppel is President, North Europe, at Information Services Group (ISG).