France helps drive EMEA outsourcing market to record high

ISG’s EMEA outsourcing index for the second quarter and first half of 2014 (27-page 3.34 MB PDF), which measures commercial outsourcing contracts with an annual contract value (ACV) of €4 million or more, said France also had its best-ever half-year performance in outsourcing by both contract value and volume.

The €930m of ACV awarded in France was “boosted by a number of mega-relationships signed in the first half”, ISG said.

EMEA outsourcing achieved a record high in the first half of 2014, based on the volume of contract awards, and achieved its strongest first-half performance by contract value since 2008, ISG said. First half ACV across the EMEA amounted to €5 billion, an increase of 32% year-on-year. The number of contracts signed was up 25% for the same period.

ISG said while the presence of large deals can temporarily boost market values, France also saw a corresponding increase in the number of contract signings. “The 40 contracts awarded in the first half was the highest ever, and more than three times the number recorded in the first half of 2013," ISG said. “This has been driven in part by increased innovation as French businesses embrace new sourcing options such as ‘software as a service’ and cloud-based solutions.”

EMEA region continues to dominate the global outsourcing market, with more than half of all global outsourcing value awarded in the region, ISG said.

ISG partner David Howie said rising demand from continental Europe, “most notably France and Germany”, had driven the region’s increased contract volume and value and maintained EMEA’s “leading position in the global outsourcing market”.

Howie said: “The market is moving in the right direction and the first-half year-on-year comparison is testament to the market’s strength. Solid performances in volume and value across most industry sectors give us confidence that this is not simply a blip. Looking ahead, we’re seeing a great deal of transaction activity in the market that should come to fruition in the second half of 2014. Taking the year as a whole we would expect ACV in the region to comfortably exceed 2013 levels.”

According to ISG, the UK market maintained its “steady performance” with ACV of €1.4bn, an increase of 6% compared to the first half of 2013. ISG said this was despite a slight drop in contract counts to 83, from 92 in the first six months of last year.

Germany saw year-on-year ACV growth in the first half of 2014 with around €740m in contract awards compared to €530m in 2013. ISG said growth was “driven by a return to strong contracting activity” with 59 contracts awarded compared to 30 in the first half of 2013.

ISG said EMEA ACV remained flat for the second quarter compared to the strong first quarter of 2014, but finished 50% ahead year-on-year. "The region benefitted from a steady IT outsourcing (ITO) performance. Though modestly down sequentially, this was the strongest second quarter ever for ITO award value (€2bn) and counts (111) in EMEA,” it said.

However, business process outsourcing continued its “lacklustre performance” across the region, with values remaining around the €500m mark for the quarter, ISG said.