Europe’s IT, Business Services Market Up Slightly in Q2: ISG Index™ – StockTitan

Please enter your login and password
Forgot password?
Don’t have an account? Sign Up!
Please enter your email address
To create a free account, please fill out the form below.
Already have an account? Login
Mira Pharmaceuticals Announces Promising Results for MIRA-55 in M…
Ocean Power Technologies Awarded Contract for Delivery of AI Capa…
Autonomix Enters into Definitive Agreement to License Intellectua…
Scinai Immunotherapeutics Announces promising results in an in-vi…
Rumble Announces Multiple Exclusive Brands
Aries Science & Technology and Enveric Biosciences Announce Licen…
Mira Pharmaceuticals Announces Promising Results for MIRA-55 in M…
Ocean Power Technologies Awarded Contract for Delivery of AI Capa…
Autonomix Enters into Definitive Agreement to License Intellectua…
Scinai Immunotherapeutics Announces promising results in an in-vi…
Rumble Announces Multiple Exclusive Brands
Aries Science & Technology and Enveric Biosciences Announce Licen…
The ISG Index™ reports that Europe’s IT and business services market grew slightly by 1% in Q2 2024, reaching US $7.7 billion in ACV. This marks the third consecutive quarter of sequential growth since Q3 2023. The market saw contrasting trends with managed services ACV declining by 8% to US $4.0 billion, while XaaS (cloud-based services) ACV increased by 14% to US $3.7 billion.
Key highlights include:
ISG forecasts 2% revenue growth for managed services and 14% for XaaS in 2024, slightly lower than previous projections due to persistent market uncertainty.
The European IT and business services market is experiencing moderate growth, evidenced by a 1% rise in annual contract value (ACV) in Q2, reaching $7.7 billion. This trend highlights a slight rebound from last year’s downturn, yet the market is restrained by weakening demand for managed services.
Managed services saw a decline of 8% year-on-year to $4.0 billion, despite a sequential growth of 3%. This suggests firms continue to prioritize cost optimization amid economic uncertainties. The high volume of smaller deals and the decline in mega deals indicate caution in large capital commitments.
However, the XaaS (Everything as a Service) segment is expanding robustly with a 14% year-on-year increase, driven by a 22% rise in IaaS (Infrastructure as a Service). This shift highlights the growing preference for cloud-based solutions as companies look to optimize costs while still investing in scalable technology infrastructure. This trend might be associated with the increased interest in data-driven technologies such as GenAI.
The geographic performance exhibits mixed results, with the UK maintaining strong figures while the Nordics and France show a decline. These regional disparities reveal the varying pace of IT adoption and economic conditions across Europe.
Investors should consider the longer-term potential of XaaS growth despite the current managed services slump, as companies are likely to continue migrating to flexible and scalable cloud solutions. However, the ongoing economic and geopolitical uncertainties necessitate a cautious approach.
The continued rise in IaaS and modest contraction in SaaS reflects a nuanced shift in how enterprises utilize and invest in cloud technologies. The 22% increase in IaaS ACV to $2.7 billion underlines a significant shift toward scalable, on-demand infrastructure solutions. Companies are increasingly seeking flexibility and scalability to support growing data needs, likely driven by advancements in AI and machine learning.
Conversely, the slight decline in SaaS investment (2% dip to $1.0 billion) indicates a more cautious approach to enterprise software licensing. This might be due to existing software saturation or a strategic pivot to more custom or hybrid solutions that better align with specific organizational needs.
The notable growth in sectors like retail (up 71%), manufacturing (up 50%) and media and telecom (up 41%) is driven by digital transformation initiatives. These industries are likely investing in bundled infrastructure and application development to enhance operational efficiency and customer engagement, further emphasizing the strategic importance of IT investments in maintaining competitive advantage.
For retail investors, these insights suggest a bullish outlook on cloud infrastructure providers and companies specializing in digital transformation solutions. However, the slower growth in managed services and BPO presents a mixed picture, implying a more selective investment strategy focusing on high-growth areas within the tech sector.
The modest growth in Europe’s IT and business services market presents a complex landscape for investors. The uptick in managed services contracts by 20% year-on-year, even with an 8% drop in ACV, suggests market participants are diversifying their service portfolios but with smaller deal values. This could indicate a strategic pivot toward more flexible and less financially burdensome engagements.
The mixed performance by industry further complicates the outlook. The significant declines in BFSI (31%) contrast sharply with the gains in retail and manufacturing, highlighting how sector-specific conditions and economic drivers influence IT spending. For instance, the BFSI sector’s caution could be tied to regulatory pressures and the high-interest rate environment, affecting their discretionary spending capacity.
The geographic disparities, specifically the robust performance in the DACH region (20% growth) versus declines in France and the Nordics, underscore the importance of regional economic stability and IT maturity in driving market performance. Investors should note these regional nuances when evaluating investment opportunities within the IT and business services market.
For retail investors, this landscape suggests a balanced approach: focusing on high-growth areas like IaaS and regions with robust economic fundamentals, while remaining cautious about sectors and regions facing economic headwinds.
Combined market up 1% in Q2, third straight quarter of sequential growth
Market impacted by sluggish managed service demand, even as XaaS grows by double digits
LONDON–(BUSINESS WIRE)– Europe’s IT and business services market grew only slightly in the second quarter, as slowing demand for managed services largely offset a sharp rise in spending on cloud-based services, 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) rose 1 percent, to US $7.7 billion, in the second quarter. Since bottoming out in the third quarter of last year, the combined market has grown sequentially for three straight quarters to reach its second-highest quarterly ACV ever in Q2.
“Having rebounded from the trough of last year’s downturn, the European market is now on a slow growth trajectory, with sluggish demand for managed services impeding overall growth,” said Steve Hall, president, ISG EMEA. “Cost optimization remains the primary driver of managed services demand, while decision-making on new initiatives continues to be slowed by macroeconomic and geopolitical uncertainty.”
Second-Quarter Results by Segment
Managed services ACV in the second quarter dipped 8 percent, to US $4.0 billion, but rose 3 percent sequentially from a weaker first quarter. A total of 295 managed services contracts were signed in the quarter, up 20 percent from the prior year. Among those contracts were four mega deals (ACV of US $100 million or more), compared with five signed in the second quarter last year. The volume of smaller deals under US $10 million rose 38 percent year on year.
Within managed services, IT outsourcing (ITO) rose 7 percent, to US $3.3 billion, driven by strong growth in bundled infrastructure and application development and maintenance (ADM) services, which offset declines in ADM-only and data center services.
Business process outsourcing (BPO), meanwhile, slumped 45 percent, to US $692 million, as all BPO segments showed declines, especially customer engagement and facilities management services.
By industry, managed services ACV was higher in retail (up 71 percent), manufacturing (up 50 percent) and media and telecom (up 41 percent), while BFSI, Europe’s largest industry for outsourcing, dropped 31 percent year on year, reflecting a higher-for-longer interest rate environment.
ACV in the as-a-service (XaaS) segment climbed 14 percent year on year, to US $3.7 billion, and has grown three straight quarters after hitting bottom in the third quarter of 2023.
Within this segment, infrastructure-as-a-service (IaaS) rose 22 percent, to US $2.7 billion, amid signs the cost-optimization cycle for cloud may be over, due in part to rising interest in data-fueled GenAI. Software-as-a-service (SaaS), meanwhile, was off 2 percent, to US $1.0 billion, as enterprises reduced licensing volume.
Geographic Performance
Although down 13 percent year on year, the region’s largest managed services market, the U.K., posted its sixth straight US $1 billion quarter with ACV in Q2 of US $1.3 billion. The DACH market (Germany, Austria and Switzerland), meanwhile, generated US $896 million of ACV, up 20 percent versus the prior year, its best quarter since the fourth quarter of 2022. Both France (down 12 percent) and the Nordics (down 18 percent) pulled back in the quarter.
First-Half Results
For the first half, combined market ACV rose 3 percent, to US $15.2 billion. Managed services, at US $7.9 billion, was down 3 percent, while XaaS, at US $7.3 billion, was up 11 percent versus the first half last year. A record 571 managed services contracts were signed in the half, up 5 percent, including six mega-deals, even with the prior year.
Within managed services, ITO was essentially flat (down 0.1 percent), at US $6.1 billion, while BPO declined 12 percent, to US $1.8 billion. On the cloud side, the IaaS market rose 15 percent, to US $5.2 billion, while the SaaS market rose 1 percent, to US $2.1 billion.
2024 Global Forecast
For the full year, ISG is forecasting 2 percent revenue growth for managed services, down 100 basis points from its April forecast, and 14 percent revenue growth for XaaS, down from its 15 percent growth forecast in April.
“Uncertainty persists in the IT and business services market, with no clear catalyst at the moment to push discretionary spending higher,” Hall said. “Activity in the important BFSI sector remains dampened, due to the higher-for-longer interest rate environment impacting the overall growth of the market. Enterprises in general continue to focus on cost optimization, and AI growth, while strong, is likely masking underlying weakness in the IT and business services industry.”
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 87 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.
The 2Q24 Global ISG Index results were presented during a webcast today. To view a replay of the webcast and download presentation slides, 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 900 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 AI and 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 1,600 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/20240715801522/en/
Philipp Jaensch, ISG

+49 151 730 365 76

philipp.jaensch@isg-one.com
Will Thoretz, ISG

+1 203 517 3119

will.thoretz@isg-one.com
Source: Information Services Group, Inc.

What was the combined ACV for Europe's IT and business services market in Q2 2024?

How did the managed services segment perform in Q2 2024 for Information Services Group (III)?

What was the growth rate of XaaS (cloud-based services) in Europe for Q2 2024?

How many managed services contracts were signed in Europe during Q2 2024?

What is ISG's (III) forecast for managed services revenue growth in 2024?

© 2020-2024 StockTitan.net

source