{"id":895426,"date":"2025-10-14T04:03:01","date_gmt":"2025-10-14T08:03:01","guid":{"rendered":"https:\/\/www.marketnewsdesk.com\/index.php\/europes-tech-services-market-slows-in-q3-despite-strong-ai-driven-cloud-demand-isg-index\/"},"modified":"2025-10-14T04:03:01","modified_gmt":"2025-10-14T08:03:01","slug":"europes-tech-services-market-slows-in-q3-despite-strong-ai-driven-cloud-demand-isg-index","status":"publish","type":"post","link":"https:\/\/www.marketnewsdesk.com\/index.php\/europes-tech-services-market-slows-in-q3-despite-strong-ai-driven-cloud-demand-isg-index\/","title":{"rendered":"Europe\u2019s Tech Services Market Slows in Q3, Despite Strong AI-Driven Cloud Demand: ISG Index\u2122"},"content":{"rendered":"

<\/p>\n

Europe\u2019s Tech Services Market Slows in Q3, Despite Strong AI-Driven Cloud Demand: ISG Index\u2122<\/b><\/p>\n

Combined market up 5% in Q2, driven by 41% growth in cloud services<\/b><\/p>\n

Managed services slumps 25%, as companies remain cautious in the face of macro challenges<\/b><\/p>\n

LONDON–(BUSINESS WIRE<\/a>)–
\nEurope\u2019s market for technology services and software slowed in the third quarter despite continuing strong demand for AI, according to the latest state-of-the-industry report from Information Services Group (ISG<\/a>) (Nasdaq: III<\/a>), a global AI-centered technology research and advisory firm.<\/p>\n

\nThe EMEA ISG Index\u2122, which measures commercial outsourcing contracts with annual contract value (ACV) of US $5 million or more, shows third-quarter ACV for the combined market (both managed services and cloud-based as-a-service) rose 5 percent, to US $9.7 billion. Although the market has grown for seven consecutive quarters, averaging 14 percent quarterly growth during that span, the rate of growth in the third quarter was the lowest since the second quarter last year.<\/p>\n

\n\u201cThe market in Europe continues to be buoyed by strong, double-digit growth in cloud services as companies race to realize their AI ambitions,\u201d said Steve Hall, president, ISG EMEA and the firm\u2019s chief AI officer. \u201cThat growth, however, masks an underlying weakness in managed services. Macro instability, tariff pressure and political risk are slowing deal approvals. We\u2019re seeing deals scoped but not closed. Clients are active, but cautious\u2014and prioritizing only what clearly ties to outcomes.\u201d<\/p>\n

Third-Quarter Results by Segment<\/b><\/p>\n

\nACV for the as-a-service (XaaS) segment soared 41 percent year on year, to a record US $5.9 billion. It was the sixth straight quarter XaaS has grown by double digits, averaging 33 percent quarterly growth in that span. Growth accelerated from the second quarter, up 840 basis points in Q3.<\/p>\n

\nWithin this segment, infrastructure-as-a-service (IaaS) climbed 50 percent year on year, to a record US $4.5 billion. Software-as-a-service (SaaS) grew 17 percent, to US $1.3 billion.<\/p>\n

\nManaged services ACV in the third quarter slumped 25 percent, to US $3.8 billion. A total of 247 managed services contracts were awarded in the quarter, down 22 percent from the prior year but up 5 percent from Q2. Among them were two mega deals (ACV of US $100 million or more), compared with six signed in the third quarter last year. The volume of smaller deals under US $10 million declined 38 percent year on year, as enterprises limited discretionary projects.<\/p>\n

\nWithin managed services, IT outsourcing (ITO) slid 28 percent, to US $2.7 billion. Business process outsourcing (BPO) also fell, down 27 percent, to US $815 million. Engineering, research and development (ER&D) was the lone bright spot, up 49 percent, to US $309 million, fueled by demand for AI-related software engineering.<\/p>\n

\nAmong the region\u2019s major sectors, managed services ACV was higher in manufacturing (up 30 percent) and energy (up 9 percent), but declined 18 percent in banking, financial services and insurance (BFSI), Europe\u2019s largest industry for sourcing.<\/p>\n

Geographic Performance<\/b><\/p>\n

\nAmong EMEA\u2019s largest managed services markets, the U.K. and Ireland declined 7 percent year on year, to US $999 million, while the DACH region fell 60 percent, to US $839 million, and France slumped 26 percent, to US $412 million. The Nordics, meanwhile, soared 106 percent, to US $595 million, and Southern Europe advanced 29 percent, to US $322 million.<\/p>\n

Nine-Month Results<\/b><\/p>\n

\nFor the first nine months, combined market ACV rose 13.5 percent, to US $28.1 billion. Managed services, at US $12.0 billion, was down 8 percent, while XaaS, at US $16.1 billion, rose 37 percent versus the same period last year. A total of 760 managed services contracts were awarded year to date, down 15 percent from last year, including eight mega-deals, compared with 12 in the prior year. The total ACV of the mega-deals declined 40 percent year on year.<\/p>\n

\nWithin managed services, ITO was down 11 percent, to US $8.8 billion, while BPO declined 20 percent, to US $2.0 billion. ER&D services soared 83 percent, to US $1.2 billion of ACV.<\/p>\n

\nOn the cloud side, the IaaS market grew 43 percent, to US $12.0 billion, while the SaaS market rose 22 percent, to US $4.1 billion.<\/p>\n

2025 Global Forecast<\/b><\/p>\n

\nFor the full year, ISG is maintaining its forecast of 1.3 percent revenue growth for managed services, with strong growth in the Americas offset by weakness in Europe and Asia Pacific. At the same time, ISG is raising its previous growth forecast for cloud-based XaaS by 400 basis points, to 25 percent, led by continuing strong, AI-driven demand for IaaS.<\/p>\n

\nHall commented: \u201cMacroeconomic signals remain mixed. Tariffs, delayed decision cycles, and geopolitical uncertainty\u2014especially in Europe\u2014are weighing on parts of the stack. Bottom line: AI is the growth engine. IaaS is leading. SaaS is scaling. And managed services is adapting.\u201d<\/p>\n

About the ISG Index\u2122<\/b><\/p>\n

\nThe ISG Index\u2122 is recognized as the authoritative source for marketplace intelligence on the global technology and business services industry. For 92 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.<\/p>\n

\nThe 3Q25 Global ISG Index results were presented during a webcast on October 9. To view a replay of the webcast and download presentation slides, visit this webpage<\/a>.<\/p>\n

About ISG<\/b><\/p>\n

ISG<\/a> (Nasdaq: III<\/a>) is a global AI-centered technology research and advisory firm. A trusted partner to more than 900 clients, including 75 of the world\u2019s top 100 enterprises, ISG is a long-time leader in technology and business services that is now at the forefront of leveraging AI to help organizations achieve operational excellence and faster growth. The firm, founded in 2006, is known for its proprietary market data, in-depth knowledge of provider ecosystems, and the expertise of its 1,600 professionals worldwide working together to help clients maximize the value of their technology investments.<\/p>\n

\"\"<\/p>\n

View source version on businesswire.com: <\/span>https:\/\/www.businesswire.com\/news\/home\/20251014185170\/en\/<\/a><\/span><\/p>\n

Press Contacts:<\/b><\/p>\n

\nPhilipp Jaensch, ISG
\n
+49 151 730 365 76
\n
philipp.jaensch@isg-one.com<\/a><\/p>\n

\nWill Thoretz, ISG
\n
+1 203 517 3100
\n
will.thoretz@isg-one.com<\/a><\/p>\n

KEYWORDS:<\/b> United Kingdom Europe<\/p>\n

INDUSTRY KEYWORDS:<\/b> Apps\/Applications Technology Consulting Carriers and Services Professional Services Software Networks Internet Data Management Artificial Intelligence<\/p>\n

MEDIA:<\/b><\/p>\n\n\n\n\n
Logo<\/b><\/font><\/td>\n<\/tr>\n
\"Logo\"<\/td>\n<\/tr>\n
<\/font><\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

Europe\u2019s Tech Services Market Slows in Q3, Despite Strong AI-Driven Cloud Demand: ISG Index\u2122 Combined market up 5% in Q2, driven by 41% growth in cloud services Managed services slumps 25%, as companies remain cautious in the face of macro challenges LONDON–(BUSINESS WIRE)– Europe\u2019s market for technology services and software slowed in the third quarter despite continuing strong demand for AI, according to the latest state-of-the-industry report from Information Services Group (ISG) (Nasdaq: III), a global AI-centered technology research and advisory firm. The EMEA ISG Index\u2122, which measures commercial outsourcing contracts with annual contract value (ACV) of US $5 million or more, shows third-quarter ACV for the combined market (both managed services and cloud-based as-a-service) rose 5 percent, to US … <\/p>\n

Continue reading “Europe\u2019s Tech Services Market Slows in Q3, Despite Strong AI-Driven Cloud Demand: ISG Index\u2122”<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-895426","post","type-post","status-publish","format-standard","hentry"],"yoast_head":"\nEurope\u2019s Tech Services Market Slows in Q3, Despite Strong AI-Driven Cloud Demand: ISG Index\u2122 - Market Newsdesk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.marketnewsdesk.com\/index.php\/europes-tech-services-market-slows-in-q3-despite-strong-ai-driven-cloud-demand-isg-index\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Europe\u2019s Tech Services Market Slows in Q3, Despite Strong AI-Driven Cloud Demand: ISG Index\u2122 - Market Newsdesk\" \/>\n<meta property=\"og:description\" content=\"Europe\u2019s Tech Services Market Slows in Q3, Despite Strong AI-Driven Cloud Demand: ISG Index\u2122 Combined market up 5% in Q2, driven by 41% growth in cloud services Managed services slumps 25%, as companies remain cautious in the face of macro challenges LONDON–(BUSINESS WIRE)– Europe\u2019s market for technology services and software slowed in the third quarter despite continuing strong demand for AI, according to the latest state-of-the-industry report from Information Services Group (ISG) (Nasdaq: III), a global AI-centered technology research and advisory firm. 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Market Newsdesk","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.marketnewsdesk.com\/index.php\/europes-tech-services-market-slows-in-q3-despite-strong-ai-driven-cloud-demand-isg-index\/","og_locale":"en_US","og_type":"article","og_title":"Europe\u2019s Tech Services Market Slows in Q3, Despite Strong AI-Driven Cloud Demand: ISG Index\u2122 - Market Newsdesk","og_description":"Europe\u2019s Tech Services Market Slows in Q3, Despite Strong AI-Driven Cloud Demand: ISG Index\u2122 Combined market up 5% in Q2, driven by 41% growth in cloud services Managed services slumps 25%, as companies remain cautious in the face of macro challenges LONDON–(BUSINESS WIRE)– Europe\u2019s market for technology services and software slowed in the third quarter despite continuing strong demand for AI, according to the latest state-of-the-industry report from Information Services Group (ISG) (Nasdaq: III), a global AI-centered technology research and advisory firm. 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