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LONDON, January 21, 2013 ― Information Services Group (ISG) (NASDAQ:III), a leading technology insights, market intelligence and advisory services company, today released data showing that while the overall outsourcing market in Europe, the Middle East & Africa (EMEA) declined in 2012, business process outsourcing (BPO) activity continued on its impressive upward trajectory and the United Kingdom recorded a healthy rise in contract values.
The 4Q12 EMEA TPI Index, which covers commercial outsourcing contracts with an annual contract value (ACV) of €4 million or more, totaled €2.1 billion in the fourth quarter. Although this represents a fall of just 6 percent from the third quarter of 2012, it marks a decline of 29 percent compared to the particularly strong fourth quarter of 2011.
Contract values for the full year were also subdued across EMEA, with €8.2 billion in ACV recorded, a 12 percent decrease from 2011. The 434 contracts awarded in EMEA in 2012 marked a 21 percent decrease compared to the record high recorded in the region last year.
“It is important that we consider these contract counts for 2012 within their larger and quite significant historical context,” said John Keppel, President, ISG North Europe. “Remarkably EMEA contract numbers have nearly doubled since 2007. Several factors account for this: more restructurings returning to market, more multi-sourcing and more new contracts coming online from first adopters.”
The TPI Index, presented by ISG, provides a quarterly snapshot of the sourcing industry for clients, service providers, analysts and the media. For more than a decade, it has been the authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider metrics.
The U.K, the largest European market, saw ACV rise 20 percent in 2012 to €3.7 billion. This healthy result was aided by a number of large Facilities Management contracts awarded in the financial services sector. Although the number of contracts signed declined year-on-year compared to 2011’s outstanding result, contracting activity in the U.K. appears very stable.
Germany, the second-largest European market, recorded ACV of €1.6 billion in 2012, a decline of 23 percent from last year, which included the Atos-Siemens mega-deal. Despite a drop in the number of contracts awarded compared to the previous year, 2012 yielded Germany’s second-highest total ever.
Outsourcing in France lost ground in 2012. Following a record year for both contract values and number of awards, the country saw ACV fall by 63 percent to €380 million while the number of contracts signed declined by 37 percent. These were the worst results since 2008, reflecting the wider business and economic challenges facing organizations in France.
By scope, IT outsourcing (ITO) and BPO experienced a surprising reversal of fortunes across in EMEA. The €5.1 billion in ITO ACV awarded in the region in 2012 was the lowest in five years. Contract counts were also down compared to recent years.
Meanwhile, BPO continued its steady climb in EMEA since the recessionary crisis. Full-year ACV grew 35 percent to €3.1 billion, the region’s best annual performance on record. This impressive growth was fuelled by Industry-Specific BPO and Facilities Management contracts.
“Whereas ITO has been the mainstay of organizations looking to cut costs in a challenging business climate, EMEA companies are now looking beyond it to BPO value propositions, which can deliver a more profound business change,” Keppel said.
“Looking ahead to the first quarter of 2013, we see a mixed picture for the global outsourcing market. We anticipate a healthy influx of awards in the first quarter, possibly followed by lower levels in the second. The short-term pipeline appears robust and better than ever, according to the service providers we speak to, yet the longer-term view has not yet crystalized.”
ISG presented the 4Q12 EMEA TPI Index during a conference call for media and analysts last week. To listen to an audio replay of the call and view presentation slides, please visit: http://www.isg-one.com/web/research-insights/tpi-index/#EMEA.
About Information Services Group
Information Services Group (ISG) (NASDAQ: III) is a leading technology insights, market intelligence and advisory services company, serving more than 500 clients around the world to help them achieve operational excellence. ISG supports private and public sector organizations to transform and optimize their operational environments through research, benchmarking, consulting and managed services, with a focus on information technology, business process transformation, program management services and enterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, the deepest data source in the industry, and more than five decades of experience of global leadership in information and advisory services. Based in Stamford, Conn., the company has more than 800 employees and operates in 21 countries.
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