In the first quarter of 2025, Europe’s as-a-service (XaaS) market achieved a notable milestone, reaching an unprecedented $4.7 billion, which represents a 34% increase compared to the previous year. This remarkable growth can be attributed to substantial advancements in both infrastructure-as-a-service (IaaS) and software-as-a-service (SaaS) sectors.
The annual contract value (ACV) for the XaaS segment skyrocketed, highlighting the ongoing demand for business and IT services in Europe. The data from the EMEA ISG Index, released by Information Services Group (ISG), underscores a robust performance, with the XaaS category marking its fourth consecutive quarter of double-digit annual growth. The combined market ACV, encompassing managed services and cloud offerings, rose to an impressive $9.1 billion, up 23% from the same timeframe in 2024.
IaaS led the charge with a 36% year-over-year increase, generating $3.4 billion, while SaaS saw a 30% rise, bringing in $1.3 billion. Although there was a slight deceleration in XaaS growth from the previous quarter, it demonstrated resilience amid fluctuating macroeconomic conditions, emphasizing the ongoing trend of enterprises prioritizing cloud migration and operational agility.
According to Steve Hall, President of ISG EMEA, Europe remains focused on digital transformation, leveraging cloud and AI technologies to enhance innovation, speed to market, and cost efficiency. He pointed out that XaaS provides flexible consumption-based models that enable organizations to modernize their IT infrastructure without hefty upfront investments.
However, potential challenges lurk on the horizon. Hall warned of difficulties anticipated from uncertainties in global trade policy, particularly regarding new U.S. tariffs and possible retaliatory actions. Such factors may extend decision-making timelines and hinder discretionary expenditures. ISG’s forecast for 2025 indicates that if the trade environment stabilizes, XaaS growth could continue at an 18% rate, consistent with prior projections. Conversely, if geopolitical issues persist, growth might slow to 15%.
Even under conservative estimates, XaaS is expected to remain a vital component, as its steady growth reflects an increasing reliance on cloud solutions for business resilience and innovation. As companies across Europe look to optimize IT expenditures while simultaneously advancing their digital capabilities, XaaS models are positioned to be pivotal in shaping enterprise technology strategies moving into 2025 and beyond.
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