Q4 Combined ACV off 1%, with Managed Services down 3% and XaaS up 0.5%
Region delivers record performance for the full year
LONDON, January 17, 2023–(BUSINESS WIRE)–Europe’s IT and business services market was down slightly in the fourth quarter, the first time in the last 13 quarters the region failed to produce year-over-year growth, according to the latest state-of-the-industry report from Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.
The EMEA ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of US $5 million or more, shows ACV for the combined market (both managed services and cloud-based as-a-service) at US $7.2 billion for the fourth quarter, down 1 percent from the prior year. It was the first time since the third quarter of 2019 that the region did not register year-over-year growth.
Managed services ACV for the quarter came in at US $3.4 billion, down 3 percent. Contract awards were up 12 percent, to 234 contracts, but that was the region’s lowest quarterly volume this year after a record-setting third quarter. IT outsourcing (ITO) slumped 15 percent, to US $2.5 billion, while business process outsourcing (BPO) soared 73 percent, to US $873 million, driven by growth in engineering services and facilities management.
ACV in the as-a-service (XaaS) segment, at US $3.8 billion, was up 0.5 percent versus the prior year, the slowest growth since the first quarter of 2015. Infrastructure-as-a-service (IaaS) rose 4 percent, to US $2.8 billion, while software-as-a-service (SaaS) dipped 7 percent, to US $1.0 billion.
"Europe finished the year on a bit of a down note, after robust growth in the prior three quarters," said Steve Hall, president, ISG EMEA. "Economic and energy concerns likely had a dampening effect on spending. However, the region’s record full-year results paint a much brighter picture of overall demand and early market indicators bode well for growth in 2023."
Full-Year Results
EMEA’s combined market ACV reached a record US $30.1 billion for the year, up 11 percent over the prior year.
Managed services had a record year, with ACV of US $14.9 billion, up 6 percent, the region’s best performance since 2011. Even though ITO, at US $11.3 billion, was down 1 percent, BPO climbed 37 percent, to US $3.6 billion. A record 1,031 managed services contracts were awarded in 2022, up 14 percent versus the prior year.
The XaaS segment generated record ACV of US $15.3 billion, up 17 percent, and accounted for 51 percent of the combined market, versus 48 percent in 2021. IaaS rose 23 percent, to US $11.3 billion, while SaaS was up 2 percent, to US $3.9 billion.
Geographic Performance
In the fourth quarter, the region’s second-largest market, DACH (Germany, Austria and Switzerland), generated US $772 million of managed services ACV, up 19 percent versus the prior year, on the strength of infrastructure services and banking, financial services and insurance (BFSI) services. Conversely, managed services in the UK, the region’s largest market, was down 28 percent, to US $843 million, as demand for BFSI and application development and maintenance services slowed. France, likewise, was down, with managed services ACV declining 16 percent, to US $430 million, as demand slowed for BFSI and data center services.
For the full year, DACH generated US $3.5 billion of managed services ACV, up 14 percent, while the UK rose 1 percent, to US $3.7 billion of ACV. France, likewise, was up 1 percent, to US $2.2 billion.
2023 Global Forecast
ISG sees several potential positive developments for the market heading into 2023, including interest rate hikes coming to an end, inflation lessening, China reopening, supply chains beginning to normalize, and the U.S. dollar coming off recent highs.
Hall said XaaS providers are still dealing with "tech excess" and compensating for softening demand by reducing the size of their work forces after a period of significant hiring the last few years. Given this, ISG is forecasting annual ACV growth of 17 percent for the XaaS market in 2023, lower than in prior years.
As for managed services, the shift toward cost optimization "should provide favorable tailwinds for this market," Hall said. ISG is forecasting 5 percent ACV growth for managed services in 2023.
About the ISG Index™
The ISG Index™ is recognized as the authoritative source for marketplace intelligence on the global technology and business services industry. For 81 consecutive quarters, it has detailed the latest industry data and trends for financial analysts, enterprise buyers, software and service providers, law firms, universities and the media. For more information about the ISG Index, visit this webpage.
About ISG
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 800 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,300 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230117005341/en/
Contacts
Will Thoretz, ISG
+1 203 517 3119
will.thoretz@isg-one.com
Kate Hartley, Carrot Communications for ISG
+44 7714065233
kate.hartley@carrotcomms.co.uk
Related Quotes
The software giant announced Wednesday that it's eliminating 10,000 jobs, about 5% of its workforce.
U.S. stock indexes finished sharply lower on Wednesday, with both the Dow Jones Industrial Average and the S&P 500 index booking their worst day in over a month.
There’s no doubt that 2023 has gotten off to a good start for stock investors. Since January 5, we’ve seen a sharp rally in the markets – the S&P 500 is up 5% in that time, and the NASDAQ index has gained a stronger 8%. While this doesn’t end the longer-term bearish market since early last year, it does bring some hope that this year may be better. Or perhaps not. Economist Mohamed El-Erian has taken a downbeat look at the near-term prospects, noting that headwinds are in play which may bring ad
Rivian Automotive (NASDAQ: RIVN) has garnered investor interest since its initial public offering in late 2021. Its first full year of production was somewhat disappointing, with production volume at less than half its current 50,000 unit annual capacity. The drop on Wednesday comes after the release of a study on brand value shows just how far electric vehicle (EV) leader Tesla has risen.
Question: Two years ago my husband took an early retirement when offered by his company. At that time we had a 401(k) with about $550,000 that we gave to a big financial services firm rep to handle. Answer: There are a few questions to ask here: First, is your withdrawal rate reasonable; second did your adviser do you wrong with those big losses; and third, what do you do about the adviser situation?
EV charging company Volta is being sold to Shell for $0.86 a share, sending Volta stock higher on the news.
The conventional wisdom outlook for 2023 is mixed – most market watchers and economists would say that a recession is likely during the first half of the year, with disagreements centered more on the duration and depth of a downturn than its likelihood, and a rebound will come in the second half, leading to stock markets finishing this year about where they began. Weighing in from Morgan Stanley, chief Us equity strategist Mike Wilson notes the conventional wisdom, saying: “Both the sell and buy
In this article, we discuss top 15 dividend aristocrats according to hedge funds. You can skip our detailed analysis of dividend stocks and their performance over the years, and go directly to read Dividend Aristocrats Ranked: Top 5 According To Hedge Funds. Investors are flocking to dividend stocks as recession fears mount and uncertainty in the […]The growing popularity of e-commerce and cloud computing should be tailwinds for these growth stocks.
Is there more pain ahead?
Yahoo Finance Live looks towards Chegg shares following the rising popularity of OpenAI's ChatGPT bot.
Yahoo Finance Live’s Seana Smith checks out several stocks trending in the after-hours trading session.
On a generally down Tuesday for the stock market, Verizon Communications' (NYSE: VZ) shares did worse than those of many other companies. The telecom giant saw its stock price erode by nearly 2.5%, amid a general slump in tech stocks and related titles, combined with a discouraging price cut from a prominent bank. Before market open, analyst Bryan Craft of Deutsche Bank enacted a 10% cut to his level on Verizon stock.
Wall Street's main indexes reversed gains by early afternoon on Wednesday as hawkish comments from Federal Reserve officials sparked worries that the central bank may not be pausing interest rate hikes any time soon. Markets reacted positively to data, which showed retail sales and producer prices declined more than expected in December. However, the gains were short-lived as St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester stressed on the need to raise rates beyond 5% to bring inflation to heel.
If you are looking for an energy stock, now is the time to err on the side of caution. Here are two stocks to consider.
The opposite of California?
These half-dozen stocks will account for the lion's share of Berkshire Hathaway's more than $6 billion in dividend income this year.
U.S. stocks slid Wednesday after the government's monthly retail sales report showed a slowdown in consumer spending activity, while a reading on wholesale inflation showed cooling prices.
Yahoo Finance markets reporter Jared Blikre examines market and sector losses, in addition to checking in on the semiconductor space, Moderna shares, and Yeti's stock.
News of a fresh dividend payment trumped an analyst's negative move on the company's shares.