New Research Shows Decline in European IT Outsourcing Spend for 2016

New research of the European IT outsourcing market by the ISG outsourcing index showed a fall in IT outsourcing with predictions of a continuing downward trend into this year.

The news is significant because Europe is the world’s largest outsourcing market, and at because the spend fell by as much as 8% to £5.3bn. The figures for the UK alone showed and even bigger drop of 19% on 2014.

Put In Context

To put the fall in IT outsourcing spend in context, global outsourcing spend actually fell by 12% to £10.4bn. Even though the spend of many European countries fell (France’s fell by 70 %!), some countries managed to buck the trend due to some large localised deals. In the German speaking ‘Dach’ region for example Siemens’ renewal with Atos meant that their 2015 IT outsourcing spend was up by 69%.

Looking at the last decade as a whole the number of IT outsourcing deals in Europe actually shows a significant rise, up 88% from £3.2bn in 2006.

Lack of Large Infrastructure Awards + Lower Value Contracts

ISG commentators put the bulk of the European fall down fewer large infrastructure awards, and lower value on the small deals. This has meant that even through the global IT outsourcing spend showed a fall in 2015, the amount of contracts signed was at a record high of 1445 (2% higher than in 2014).

Partner and president of ISG John Keppel’s comments on these latest figures put the driving down of outsourcing contract value and duration down to “Cloud, digital and automation” and Keppel said that “unlike the American market, the likes of cloud infrastructure suppliers such as AWS have yet to win any big deals”. Keppel also added that there was likely to be a more significant uptake in the European market over the course of 2016. A Cloud component looks set to be a feature of most of the digital projects and initiatives in the coming year.

Good News For Your Business

The trend at the moment is for businesses to be paying less for their outsourced IT services, as well as being able to buy with greater cost flexibility and to get the most value out of smaller deals.

Some Big Providers Did Well

Despite the overall bad news for many European outsourced IT suppliers some larger companies such as Accenture, Atos and BT saw their revenue up.