Outsourcing bounced back in EMEA with a strong fourth quarter. Outsourcing activity in the region grew 44% compared to the third quarter and ACV exceeded €3 billion in the fourth quarter of 2015 for only the third time ever. But contract values continue to decline.
The EMEA results echoed the strong global market performance, which posted the highest quarterly level in 4 years, says researcher Information Services Group with global annual contract value (ACV) rising 17% in the fourth quarter, to $3.1bn, fueled by the signing of five mega-relationships.
It was only the third time ever that the EMEA region surpassed €3 billion in ACV in a quarter, and the first time since the third quarter of 2012. For the full year, EMEA was unable to counter the effects of a sluggish first half.
Regional ACV declined 8%, to €9.4bn, while the number of awards fell 7%, to 601. This decline can be attributed to a sharp reduction in ITO (IT outsourcing) activity and values, as the number of large infrastructure awards dropped sharply and contract values were lower across the board. In stark contrast, BPO (Business Processes) ACV in 2015 surged 24% for the year, with contract awards up 11%, led by industry-specific, Contact Centres and Facilities Management work.
"It is encouraging to see such a strong finish to the year in EMEA. Enterprises in the region are actively seeking ways to revamp their processes around cloud, digitalisation and robotics, resulting in a shift to smaller deals, which also allow for flexibility and cost variability," said John Keppel, partner and president, ISG EMEA & Asia.
"This new approach to outsourcing looks set to continue; globally, we see more enterprises are sourcing than ever before and they're paying less for services, which encourages them to outsource even more."
By market, the UK, while making some gains on its third-quarter results, fell short of 2014 full-year values as ACV sank 19% in 2015. However, in keeping with the trend toward more awards of lesser value, the 234 contracts for the year was a record high.
DACH had its best year ever, matching its 2011 performance, as ACV surged 69%. However, the sub-region bucked the trend seen elsewhere by posting its lowest contract count since 2007. Its strong ACV increase was aided by mega relationship awards, including Siemens' large contract renewal with Atos.
France struggled in comparison with its stellar performance in 2014, when it reached record highs in both contracting and ACV.
Values fell by 70% during 2015, while contract volume dropped by 40%. This sharp decline may mark a return to normal activity levels after a standout year of intense activity, rather than a longer-term weakening trend. Both the Nordics and Benelux saw ACV gains in the fourth quarter but an overall decline in both ACV and deal counts for the year compared with 2014.
By sector, Telecom followed the broad trend of increased contract activity at lower values, as the number of contract awards reached record numbers despite a slight decline in ACV. Travel and transport also achieved new highs in contract numbers, while values decreased.
The region's powerhouse sectors, Financial Services and Manufacturing, finished close to their 2014 figures. Financial services ended the year with a relatively flat performance while Manufacturing bounced back to post an 8 percent gain in ACV over last year, although its deal count plunged by 26 percent.
Keppel concluded, "The return of mega relationships in the fourth quarter gave EMEA the boost it needed to reach the landmark figure of €3 billion. After a slow start, the final few months of the year have helped put outsourcing in a good place as we exit 2015 and enter 2016."