ISG Index: European IT Services Market Off to a Strong Start in 2022

Demand for cloud services continues to gather pace with an expected 44% increase according to the latest ISG Index.

Europe’s IT and business services market has made a strong start to 2022 as cloud-based services saw record demand in the first quarter, with the market momentum for managed services continuing to grow, the latest IT service industry figures reveal.

The EMEA ISG Index covers outsourced services with an Annual Contract Value (ACV) of at least €4.6 million. According to it, the total market in EMEA, which includes both cloud-based services and managed services, has exceeded the quarterly value of €6.4 billion for the first time – an increase of 21% compared to the first quarter of 2021.

Recovery in DACH continues

In the DACH (Germany, Austria, Switzerland) and France regions, the recovery that began in the second quarter of 2021 continued. Although the figures for both markets were down compared to the strong first quarter of the previous year.

However, ACV in the DACH region increased by 33% to €756 million in the first quarter of 2022 compared to the fourth quarter of 2021. At the same time, ACV in France was slightly down compared to the previous quarter at €502 million 461 million. But ACV was again above €459 million – for the fourth time over the last five quarters.

The UK market is also continuing its strong post-Brexit recovery. It surpassed the $1 billion (€0.9 billion) ACV mark in managed services for the second quarter in a row. In the first quarter, annual contract value was US$1.1 billion (€1 billion), up 27% from the same quarter last year.

Scandinavian countries (up 26%) and Southern Europe (up 93%) also contributed to growth in Europe.

“The overall market in Europe has been growing steadily recently as demand for cloud-based services increasingly catches up with the rest of the world,” says Barbara Florschütz, managing director of ISG Germany. “Market growth slowed temporarily towards the end of last year but is now showing the high growth rates of the first half of 2021 again.”

Cloud-based services in EMEA continue to grow

Demand for cloud-based services (XaaS) in EMEA continues to grow. In the first quarter, ACV increased by 44% to a record €3.6 billion and now accounts for 51% of the total market. This represents an all-time high. The XaaS market in EMEA recorded growth of more than 40% for the third quarter. Within the XaaS segment, Infrastructure-as-a-Service (IaaS) ACV grew 58% in the first quarter to a record €2.7 billion. Software-as-a-Service (SaaS) grew 15% to €0.9 billion but fell 2% short of the record fourth quarter of 2021.

The annual contract value of managed services increased by 3% to €3.4 billion. It was the sixth consecutive quarter that this segment’s ACV exceeded €3.1 billion. This is the longest period recorded by the ISG Index with such sustained high demand.