EMEA Outsourcing Slowdown due to Economic Uncertainty

The pace of outsourcing contracting in Europe, Middle East and Africa (EMEA) continued to slow in Q212 as a result of the region’s wider economic difficulties, according to data released by Information Services Group (ISG).

The market intelligence group reports that its 2Q12 EMEA TPI index, which covers commercial outsourcing contracts worth €20m (US$24.5m) or more, measured total contract value (TCV) of €6.7bn, a drop of 21% from Q211 and 11% from Q112. The 65 contracts the region awarded during the quarter represented a decline of 29% year-over-year and 26% sequentially.

ISG said that the latest performance continues a trend of outsourcing activity being stymied by macroeconomic uncertainty and concern about the future of the euro. For the first half of 2012, EMEA TCV fell by 24% over the same period a year ago. During this period, the region awarded just one mega-deal, a contract with TCV of at least €800m, down 67% year-on-year. However mega-relationships, or contracts with an annual contract value (ACV) of €80m or more, increased by 80%.

“Following a record-breaking second half of 2011, Europe has had a notably sluggish start to the year,” said ISG’s EMEA partner, Duncan Aitchison. “The shortfall in EMEA stems from a drop-off in the pace of smaller contract awards, as well as the absence of significant mega-deal activity.”

The Q212 EMEA TPI index also showed the pace of outsourcing contracts in Europe trailing the other major regions of the world during Q2. Americas TCV of €6.5bn was up 6% over the same quarter a year ago while Asia-Pacific TCV of nearly €4bn represented growth of 181% year-on-year.

The decline in overall contracting activity in EMEA was particularly evident in the more mature markets in the region. UK TCV of €5.7bn was down 12% year-on-year. By contrast, France, southern and eastern Europe maintained their five year averages.

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