Cloud service spending grows while IT outsourcing outlay plummets

Companies in the Europe, Middle East and Africa (EMEA) region may be spending far less on traditional IT outsourcing, but those turning to cloud computing solutions are steadily growing, according to new research.

Data from Information Services Group (ISG), a technology research and advisory firm, shows that spending on more old-fashioned IT services fell by 43 per cent during the third quarter of 2017 to reach just €1.3 billion (£1.16 billion).

The firm defines traditional IT spending as including suppliers who are brought in to operate an IT service and bringing in their own employees to do it, and developing or supporting software used by enterprises.

The figure represents the lowest level seen for more than 10 years and has almost been matched by spending on as-a-service facilities: in the same period, cloud computing expenditure swelled by 48 per cent to hit €1 billion.

Despite a downturn in traditional IT spending this quarter, on a yearly basis there has been a slight increase, with a 3 per cent growth taking 2017’s spending up to €9 billion.

According to the report’s authors, expenditure on IT projects has dropped due to economic uncertainties in the EMEA region, including Brexit and the latest German election.

As a result, they continue, cloud service spending will “continue to grow significantly” as businesses are forced into finding cost-effective strategies to boost productivity.

Spending in the UK is also at its highest level for five years, with €2.5 billion being spent, a 15 per cent surge on levels seen last year.

Barry Matthews, partner at ISG, said: “Despite a disappointing third quarter, the Emea market year to date is showing modest growth, with record as-a-service contracting not quite able to counter the drop in traditional sourcing activity.”