What is the demand for IT Outsourcing Services on the European market?

The European demand for IT outsourcing (ITO) services is growing. This is driven by factors like the rapid expansion of digitalisation, the shortage of talent, AI technology and the need for cost-effective solutions. Sustainability is also becoming more important for business in Europe. Key IT skills include cybersecurity, data science, software development and AI-ML technologies. Specialisation creates potential in any sector. European SMEs are the most suitable target group when entering the European market.

1. What makes Europe an interesting market to target?

In IT outsourcing, companies contract IT-related processes to external service providers. These can be domestic, nearshore or offshore. Continuing digital transformation and technical developments are boosting European demand for IT solutions. Talent is scarce and prices are rising in nearshore destinations like Central and Eastern Europe (CEE). So offshoring to developing countries is becoming more attractive. The presence of diaspora in Europe could provide a further basis for offshore ITO.

Nearshoring versus offshoring

European companies prefer to outsource services to providers in their own countries. This is known as 'domestic outsourcing' or 'onshoring'. It is often the easiest option because there are no language barriers or time differences and suppliers are bound by the same laws as buyers. It also gives buyers a high level of control over the processes, progress and activities. IT projects are often complex, long and critical to the clients’ strategic future. This makes good communication between clients and providers particularly important.

According to an international survey in 2021, 46% of ITO/BPO budgets are spent onshore, 23% nearshore and 31% offshore. Although the share of onshore outsourcing may be higher amongst European SMEs, this survey gives a general impression of the market.

Figure 1: Differences between onshore, nearshore and offshore from the perspective of European buyers

Source: Globally Cool

The most popular nearshoring locations for Western European companies are in CEE, such as Poland, Bulgaria and Romania. In addition to offering the usual benefits of nearshoring, these countries are members of the European Union (EU). This means their contracts and payments are governed and protected by the same European legislation that applies in the buyer countries.

However, labour prices in nearshore countries are rising, especially in CEE. This makes service providers in these countries less price competitive. In turn, this could make European companies more open to offshoring.

Source: Eurostat, 2024

To benefit from these developments, you have two options: forming strategic partnerships with nearshoring providers or competing with them. Kearney’s Global Services Location Index (GSLI) ranks ITO/BPO destinations according to four characteristics: financial attractiveness, people skills and availability, business environment and digital resonance. This can give you an idea of how competitive your country is.

Most developing countries are much more financially attractive than non-developing countries. However, their profiles differ in other areas. For example, Indonesia ranks sixth on the GSLI, but it lacks skilled workers and needs to focus on digital skills enhancement to maintain its position. Egypt ranks 23^rd but falls short on a digital focus and faces rising labour costs. Morocco ranks 28^th. It has climbed 12 places due to its cost-competitiveness, multilingual workforce and digital upskilling. Jordan ranks 39^th. It has a competitive cost advantage and good availability of talent.

Growing European demand for ITO 

Determining the exact size of the European ITO market is difficult because definitions and indicators differ greatly depending on the source. This makes the different values difficult to compare and combine.

To present a coherent and consistent estimate across the European market, this study uses data from several editions of the ISG Index. This index measures commercial outsourcing contracts with an annual contract value (ACV) of $5 million (USD) or more. This gives an indication of the general ITO market. While the ACV for Europe also includes the Middle East and Africa (EMEA), these contracts are mainly European.

Source: ISG Index 2024 Europe Press Release, Americas Press Release & Asia Pacific Press Release

Europe accounts for about one third of the global market, with an ACV of about €25 billion in 2024. The United States of America (USA) is also a large outsourcing market. They face competition from nearshore suppliers in Latin America rather than Eastern Europe.

Source: ISG Index, 2020-2024

Between 2020 and 2024, the European ITO market (including domestic, nearshore and offshore outsourcing) grew from around €18.8 billion to €28.4 billion in terms of contracts per year. This translates to an average annual increase of 11%. Within ITO, the ISG Index highlights Software-as-a-Service (SaaS) and Infrastructure-as-a-Service (IaaS). 2023 was the first time that the full-year market was down since 2016. This was due to a 21% drop in IaaS contract values. In 2024, the market recovered as the IaaS ACV bounced back with a 30% increase from 2023.

Source: Statista, 2025

Looking at the revenue, the European ITO market grew significantly over five years. Revenue increased from €88.6 billion in 2020 to €162.1 billion in 2024. This represents a CAGR of 16.3%. 

Source: Statista, 2025

In the coming years, the European ITO market is expected to continue to grow. The revenue is expected to increase from €174.6 billion in 2025 to €237.1 billion in 2030; this is a CAGR of 6.3%. 

Digital transformation and innovation is a driver for ITO demand            

Companies continue to digitalise. 74% of European SMEs had achieved a basic level of digital intensity in 2024, up from 70% in 2022. Digital intensity describes the degree to which companies are digitalised. A basic level means they use at least 25% of selected digital technologies (such as using AI technology, e-commerce sales for at least 1% of total turnover). The EU aims to increase this share to more than 90% by 2030 through its Digital Decade policy programme.

Growth in European companies

The outlook for the ITO market in the coming years is good. Businesses are continuing to invest in digitalisation, with a strong focus on AI-ML, cybersecurity and cloud technology. The EU’s Digital Decade aims to make sure that 75% of all European businesses are using cloud-edge technologies by 2030. 

Amongst other developments, consumers have further embraced online shopping, AI-powered personalisation, smart-home integration and next generation wearables. The manufacturing industry is focused on various aspects, including smart factories, Industry 4.0, advanced robotics and humanoid automation and digital supply chain transformation. The financial industry wants to be able to access data from different locations and retailers need web shops and apps. Linked to growing digitalisation is also the normalisation of remote work (partly due to COVID). This lowers the barriers for working with remote teams. 

These trends are projected to continue in the coming years. Companies know that digital solutions offer major benefits. In most cases, however, it is not feasible to hire staff to develop these digital tools. To solve this, businesses are starting to realise that ITO can make them more flexible and resilient in difficult times. Some companies that are reconsidering their strategies may move their offshored activities to nearshore or domestic providers in search of stability. Others may have become more interested in offshoring as a way to save costs. 

Companies often have at least one outsourcing partner for their IT services. Companies are increasingly adopting ecosystem-based outsourcing strategies. This means companies have one lead partner and several specialised service providers. This, combined with the goal to minimise risks, saves costs, improves flexibility, increases productivity and/or helps them select the best quality provider for each technology. 

Growth coming from the EU

Digital transformation is a key priority for the EU. With Europe’s Digital Decade policy programme, the EU has set concrete targets and objectives for 2030 in areas like the digital transformation of businesses, digitalisation of public services, skills and providing secure, sustainable digital infrastructures. For example, the EU aims for 100% of EU citizens to have access to e-health by 2030. In 2024, 48% of EU member states provided their citizens with access to their electronic health records through online portals and mobile apps. 

EU funding programmes accelerate digital transformation. For example, the Digital Europe Programme (DIGITAL) is a funding programme with a budget of over €8.1 billion. It is focused on bringing digital technology to businesses, citizens and public administration systems. 

For you, this strategy presents opportunities to tap into a growing market for digital services and solutions across Europe. The EU seeks to boost innovation and digital transformation across various industries. This leads to a growing demand for expertise in areas like cloud computing, cybersecurity and data analytics. ITO providers that can offer these services and solutions may benefit from the growth opportunities emerging in the EU’s digital economy.

ITO allows buyers to focus on their core business functions

One major advantage of outsourcing IT services is that European end-user companies do not need to hire in-house expertise. IT services require excellent knowledge, skills, tools and security provisions. Most European end-user companies either do not have these resources or have significantly scaled them back over the years. Outsourcing allows them to focus on their core business and provides scalability. It gives the flexibility to engage IT specialists as and when needed.

For European organisations that plan to spend more on external IT providers in the next two years, the main driver is the need to access talent and resources. This is followed by scalability and the ability to focus on core business operations.

Source: Whitelane Research, 2024/2025

Scalability, flexibility and speed to market

As shown in Figure 7, scalability is the second most important driver for European organisations to increase their IT spending on external providers (in the upcoming two years). ITO enables companies to scale their IT resources quickly. It gives companies access to skilled personnel without the need for long recruitment processes. ITO also makes companies more flexible. It allows them to quickly react to changes in the market. For example, companies can easily scale up during periods of high demand, while they can scale down operations in periods of low demand.

Talent shortage in Europe

In Europe, there is a large gap between the number of IT jobs and the number of available IT professionals. Many European companies are having trouble recruiting ICT specialists.

*of enterprises that have recruited or have tried to recruit ICT specialists.

Source: Eurostat, 2025

In 2024, there was a slight drop in the difficulties of filling vacancies for IT specialists. Several factors contributed to this. In 2021 and 2022, companies over-hired ICT specialists due to the Covid-19 pandemic. They then tightened their budgets during the economic slowdown in 2022 and 2023. This led to more skilled professionals on the labour market. Companies have also been focusing on upskilling and reskilling their workforce, and AI is starting to affect industry. Despite the slight improvement in 2024, the talent shortage remains high. 

To fill the gap, many EU companies try to hire IT staff from abroad. The shortage is affecting most European countries, and most European developers prefer jobs within their own countries. This means companies regularly recruit talent from outside Europe. An easier option that provides more flexibility is to outsource IT tasks to offshore providers like you. The increase in remote working due to lockdown measures only accelerated this trend. It blurred the distinction between in-house, nearshore and offshore teams.

Cost reduction continues to be a motive for ITO abroad

Cost reduction remains one of the most important reasons for European companies to outsource IT services to providers abroad. The continued shortage of IT skills in Europe is further increasing the cost of the scarcely available specialists. This provides opportunities for outsourcing companies in developing countries. They are often able to offer similar services for lower prices.

This could make offshoring to developing countries more attractive. In general, IT specialists cost less per hour in developing countries than they do in Europe. However, if your offer is 'too cheap', European buyers may think that it is too good to be true and assume that the quality of your services is low. In a 2024 ISG analysis, high and ‘medium’ bids won 64% of the time; low bids only won 36% of the time.

Sustainability

Sustainability is becoming more important to doing business in Europe; both social and environmental sustainability. Since 2021, the government of the United Kingdom (UK) has been assigning 10% of the points in its Requests for Proposals to social value. Similar arrangements are seen across Europe, in both governments (like the Netherlands) and companies (including SMEs). Other countries and companies are expected to follow. As an ITO provider, therefore, you should have at least some sort of sustainability practice in place. 

The ISO 26000 standard provides guidance on social responsibility. For ITO SMEs, its most relevant aspects are labour practices, fair operating practices and community involvement. One example of green sustainability in ITO is energy reduction. Of all the energy used in IT, the end-user environment accounts for almost 40%. This means that a lot of energy can be saved by making the end-product more energy efficient. For example, the programming language you choose influences the energy efficiency of your software.

2. Which European markets offer the most opportunities for ITO suppliers in developing countries?

Europe is not a uniform market for ITO providers. Countries in Northern and Western Europe are traditionally the largest markets for ITO. Whereas the largest countries offer opportunities based on their size, some smaller countries are key players in the IT industry. The CEE region is also becoming a promising market for partnerships with nearshore providers.

Northern and Western Europe are the largest European markets for ITO

Whilst the largest countries offer opportunities based on their size, some smaller countries are also open to outsourcing and/or specialise in IT. In smaller countries, the tech talent tends to be concentrated in a single hub, such as Copenhagen (Denmark). In countries like Germany, tech talent is often distributed across several large cities.

Source: Whitelane Research, 2024/2025

The United Kingdom: IT outsourcing driven by talent shortage and openness to offshoring 

The UK is the second largest economy in Europe. Its most prominent sectors include finance and banking, which are part of the services sector. Together, finance and banking make the largest contribution to the British Gross Domestic Product (GDP). Outsourcing is a common practice in this sector, stimulating the demand for ITO services in the UK. The most important IT market segments in the UK are fintech, AI, cybersecurity, healthcare and life science, creative industries, advanced manufacturing, clean energy and sustainability.

Revenues in the UK’s ITO market are projected to reach €38.9 billion by 2025. They are expected to grow at an annual rate of 7.18% from 2025 to 2030, eventually reaching a market volume of €55.1 billion by 2030.

In 2024, 35% of the UK’s top IT-spending organisations planned to increase their IT outsourcing in the next two years. This is considerably more than in 2023 (30%). Their main driver for ITO was access to resources and talent, followed by scalability to business needs and business transformation. 27% planned to increase their nearshoring, but nearshore capacity may be an issue.

Since the UK withdrew from the EU (Brexit), many EU workers have left the country. At the same time, immigration from the EU to the UK has consistently declined. Together, these trends have led to a war for talent and increased labour costs. In the UK labour market, IT and data skills are still the hardest to find. In the first quarter of 2025, 51% of surveyed IT firms in the UK planned to hire, but 75% were struggling to find qualified candidates. The most challenging roles to fill include AI and machine-learning engineers, data analysts and scientists, cybersecurity analysts and cloud engineers.

These developments offer opportunities for ITO providers in developing countries. Of all European markets, the UK is one of the most open to offshore outsourcing and the least cautious about doing business with developing countries. This openness is due to the nation’s cost-saving business culture and historical ties to many countries across the globe. Language barriers are low, as the UK’s official language is English. Moreover, the UK is a global tech hub and has a large IT demand. This makes the British market relatively accessible for offshore providers.

The presence of migrant groups is also an important factor in the UK market for ITO. At present, around 6.7 million migrants with a background in developing countries are living in the UK. They account for about 10% of the total British population. The largest of these communities consist of people from India, Pakistan, Nigeria, Bangladesh, Ukraine and South Africa. India and Pakistan are particularly well-known providers in the British outsourcing market.

Germany: Facing a high ICT skill shortage

Germany is the largest economy in Europe, and home to 19% of the EU’s population. Revenues in the German ITO market are projected to reach €29.3 billion in 2025. They are expected to grow at a compound annual rate of 5.7% from 2025 to 2030, ultimately reaching a market volume of €38.8 billion by 2030. Although this makes Germany an interesting market, German companies are less open to offshore outsourcing than companies in countries like the UK.

Due to the continuing shortage of skills and increasing experience with offshoring, German companies are adopting a somewhat more positive attitude towards offshore ITO. In recent years, they have also become more open to outsourcing because they experienced the possibilities offered by remote working.

In a 2024 German IT sourcing survey, 58% of Germany’s leading IT-spending organisations stated that they planned to outsource their IT at the same rate or more in the next two years. The main driver was a desire to focus on core business operations, followed by access to innovation, cost reduction and access to talent. At the same time, 29% planned to spend less on ITO. When looking at nearshore outsourcing, 44% of organisations planned to increase their nearshore outsourcing activities. This is mainly due to the combination of cost-effectiveness and geographic proximity.

Market segments that offer opportunities for IT service providers include advanced manufacturing and Industry 4.0, cloud computing and IT services, cybersecurity, healthcare and digital health, green tech and renewable energy, finance and fintech, IT service management (ITSM) and the automotive industry.

There could be some language barriers when providing ITO services to Germany. In general, German companies prefer to do business in German, which is why they prefer to nearshoring when they outsource. You usually need a German intermediary to communicate with clients. If you meet these criteria, you could also target German-speaking companies in countries like Austria and Switzerland.

Germany is home to an estimated 7.6 million migrants with roots in developing countries, accounting for around 9% of the total population. The largest of these communities are people with roots in Türkiye, Ukraine, Kazakhstan, the Syrian Arab Republic, Afghanistan, Serbia, and Bosnia and Herzegovina. Given the relatively strong ties between Germany and CEE, opportunities in the German ITO market are particularly strong for providers from this region.

Nordic countries: Known for their highly developed technology industries 

Individually, the markets of the Nordic countries are smaller than other European markets. However, they are relatively open to outsourcing. People from these countries are highly proficient in English, which makes doing business relatively easy. 

The Nordic countries are known for their highly developed and advanced technology industries. They are home to some of the fastest-growing global tech companies, including Spotify and Mojang. In addition, investments in the IT industry are very high. Although the workforces in these countries have some of the highest shares of IT specialists in Europe, there are not enough to meet demand.

In 2025, 67% of Nordic leading IT-spending organisations planned to outsource their IT at the same rate or more in the next two years. Their main driver for outsourcing their IT was scalability, followed by improving service quality and focusing on core business functions. For nearshore outsourcing, 40% of Nordic organisations planned to increase this activity. Denmark (49%) and Finland (44%) showed the highest percentages. The main reasons for nearshore outsourcing include cost efficiency, risk reduction and geographic proximity. 

Norway has a particularly large oil and gas industry. The most in-demand IT services are product innovation, digitalisation, robotics and network security. Known as an innovative nation, Sweden is home to many start-ups. Swedish tech companies are mainly looking for process engineers, project leaders, laboratory engineers, IT developers (such as Java) and testers.

In Finland, IT has become the largest industry. Finland is mainly looking for telecommunication engineers, systems analysts, software developers, and web and multimedia developers. Denmark is experiencing a talent mismatch. Their most sought-after specialisations are software development, marketing (digital), mechanical engineering, regulatory-affairs management and quality-assurance management. Read more about the individual Nordic IT markets.

Around 2.5 million migrants with roots in developing countries are currently residing in the Nordic countries, with more than half of them in Sweden. These migrants account for about 9% of the total Nordic population. The largest of these communities consist of people from the Syrian Arab Republic, Ukraine, Iraq, Iran, Somalia and Türkiye.

Some Nordic countries, especially Finland, have many connections in Russia. However, due to various sanctions on Russia in response to the ongoing war in Ukraine, the Russian software outsourcing industry has lost its position in the European tech scene.

France: Interesting market for francophone providers in Africa

As the third-largest economy in Europe, France is another European market that is particularly interesting because of its size. In 2024, 63% of France’s leading IT-spending organisations planned to outsource their IT at the same rate or more in the next two years. Their main driver for outsourcing their IT was focusing on core business functions, followed by cost reduction, improving service quality and innovation. France and Switzerland are the only two European countries in the survey for which cost reduction continued to be a main reason for IT outsourcing. 

The most important industries in France are banking, fintech, insurance, health tech, manufacturing, retail, e-commerce, energy and green tech, and SaaS solutions (cloud solutions). The software sector is strong, with a focus on enterprise solutions, cloud services and AI integration.

To provide ITO services to French companies, you must be able to work in French. Given that French is the official language in 29 countries worldwide, for many service providers this requirement does not pose a barrier to market entry. Instead, it makes France a particularly interesting target market for providers from African countries such as Senegal, Côte d'Ivoire and Cameroon. Offering services in French also allows you to target francophone companies in Belgium and Switzerland.

Many people from former French colonies attend university in France. This direct link to France can facilitate outsourcing when these graduates return home. In addition, nearly six million migrants with roots in developing countries are currently living in France. They make up around 9% of the French population. The largest of these communities consist of people from Algeria, Morocco, Tunisia, Türkiye, Comoros and Senegal. 

The Netherlands: An IT hotspot open to outsourcing

The Netherlands has the sixth-highest GDP in Europe, and it is a true IT hotspot. Revenues in the Dutch ITO market are projected to reach €10.6 billion by 2025. This revenue is expected to grow at a compound annual rate of 5.81% from 2025 to 2030, ultimately reaching a market value of €14 billion by 2030.

The country is strong in digital innovation. Industries use IT to boost their growth, efficiency and sustainability. Key industries in the Netherlands include fintech, health tech, Industry 4.0, agritech, energy, sustainability and telecommunications. The Netherlands has strong digital infrastructure, a central location in Europe and government policies that support technology. These strengths make it a top destination for tech-driven businesses.

Companies in the Netherlands are relatively open towards outsourcing. Language barriers to doing business in the Netherlands are generally low, as the Dutch are highly proficient in English. In 2025, 66% of leading IT-spending organisations in the Netherlands planned to outsource their IT at the same rate or more in the next two years. Their main drivers were scalability to business needs and focusing on core business functions. 40% of the surveyed organisations planned to increase nearshore outsourcing. Reasons for nearshore outsourcing include cost efficiency, risk reduction, EU compliance and geographic proximity.

Even though the density of IT professionals in the Dutch workforce is amongst the highest in Europe, the country still has a pressing need for IT talent. The Netherlands has more than 600 international ICT companies operating within its borders. Almost 180 of them have headquarters in Amsterdam. 

Dutch companies were also amongst the first to adopt cloud computing, which is a necessity for working remotely. Their openness to remote working and collaboration with people and companies in other countries makes the Netherlands highly open to outsourcing as well. 

The Netherlands is home to about 1.4 million migrants with roots in developing countries, representing roughly 8% of the total Dutch population. The largest of these communities consist of people with backgrounds in Türkiye, Suriname, Morocco, Syrian Arab Republic, Ukraine and Indonesia.

Poland: Need for offshore partners to keep up with demand

Within CEE, Poland is a major player in the IT industry. The country has the highest number of tech-related start-ups in the region. It is home to more than 525,000 IT specialists and software developers. They rank amongst the best in the world, enhancing Poland’s popularity as a nearshoring destination for European buyers.

Revenues in the Polish ITO market were projected to reach €3.7 billion in 2025. They are expected to grow at a compound annual rate of 7.75% from 2025 to 2030, ultimately reaching a market volume of €5.5 billion.

Although Poland has become an important and valued ITO destination for Western and Northern Europe, the country is currently facing a talent shortage. To meet the demand from its growing IT industry, Poland is increasingly having to turn to offshore partners. Given that the country has the highest hourly rates for software development in CEE, Polish software companies can save significant costs by outsourcing some development tasks or projects to you.

3. Which ITO services from developing countries are most in demand from European markets?

The demand for ITO continues to increase. AI-ML, cybersecurity, data science and analytics, cloud computing and software development skills are the most needed. SMEs are your most suitable potential buyers. These companies are a good match for you in terms of capacity and flexibility. Although the banking, financial services and insurances (BFSI) sector is Europe’s largest ITO market, specialisation can create opportunities in any sector.

While experimenting with emerging technologies like virtual and augmented reality may be optional for European companies, investing in cybersecurity is not. The same applies to most other areas of expertise in the six leading skills. For example, there is an increasing need for employees to have remote access to documents and tools, platforms and programs through the cloud. At the same time, emerging technologies are offering opportunities as well. Specialising now means less competition in the short term and gives you a head start as the market matures.

In general, the following six IT skills are the most sought after in Europe:

Software development

Software development is the process of creating computer programs or applications that perform specific tasks or functions. It involves tasks such as planning, coding, testing and maintaining software to ensure it works effectively and efficiently.

Software development services are a key segment within ITO, with cybersecurity as a top priority. Increased digitalisation leads to increased demand for software solutions. Revenues in the European software market are expected to grow from €151.69 billion in 2025 to €184.29 billion in 2030. This translates to a CAGR of 3.91%.

According to market experts, the best opportunities in software development are in fintech, healthcare, retail or e-commerce, industry, education, transport, smart mobility and energy. The most in-demand programming languages are Java, JavaScript, Python and C/C++, depending on the market and type of software.

Cloud computing

Cloud computing is on-demand access to computing services over the internet. This can include servers, data storage, databases, networking, software and AI. These services help companies work faster, use resources more easily and to create economies of scale. Some important features of cloud computing include global access, on-demand self-service, scalability, flexibility and pay-as-you-go services. Cloud application development is the software development process to create software that runs in the cloud. 

There are three types of cloud computing services: 

• IaaS: Infrastructure as a service;
• PaaS: Platform as a service;
• SaaS: Software as a service.

European companies have been the front runners in cloud adoption, and skills in cloud computing have therefore been in high demand over the past five years. The earliest adopters of cloud computing are generally the largest companies and government organisations. At present, European SMEs are quickly moving to the cloud. For SME cloud-computing providers from emerging economies, the European cloud-computing market has become even more interesting, as these SMEs are easier to target than larger companies are. 

The demand for cloud-based services is growing rapidly. Cloud-computing skills are increasingly essential for small software development companies from developing countries, as they are used in virtually all types of ITO services. Using the advantages of cloud computing’s main building blocks often requires software development. 

The European market for cloud computing is projected to grow from about €72 billion in 2024 to €345 billion in 2034, with a CAGR of 17.1%. The largest segment in the European cloud-computing market is Software-as-a-Service (SaaS). It accounted for over 63% of the market in 2024.

Mobile application development

Mobile application development refers to the creation of software applications that run on mobile devices such as smartphones, tablets and smartwatches. Europe’s mobile app market is growing. Consumers are spending more time on their mobile devices. Between 2023 and 2024, global revenue from in-app purchases (IAP) and subscriptions increased by 13%, reaching €128 billion in 2024. This growth was particularly strong in the United States and Europe. IAP revenue in Europe increased by 24% in 2024 compared to 2023. There has also been significant growth in jobs in the EU app economy. 

Cybersecurity

Cybersecurity involves strategies and technologies designed to safeguard digital systems, networks and data from unauthorised access, cyberattacks and potential harm. Examples include identity and access management, infrastructure security and data security. 

Demand for cybersecurity is booming, due to increased digitalisation, legislation and awareness. In the first quarter of 2025, cyberattacks around the world increased sharply and were more sophisticated. European organisations experienced an average of 1,612 cyberattacks per week, reflecting a 57% year-on-year increase.

The European cybersecurity market is projected at about €67 billion in 2025, and it is estimated to reach about €172 billion by 2033. This translates to a CAGR of 12.4%. In Europe, cybersecurity skills have become one of the most sought-after areas of IT expertise, especially in cloud and data security.

Artificial intelligence

AI is a set of technologies used to create intelligent systems that can simulate human thinking abilities and behaviour. Their goal is to perform tasks as humans would. AI is an umbrella term that covers a variety of technologies, including machine learning (ML), deep learning, generative AI (Gen AI), reinforcement learning, computer vision, natural language processing (NLP), robotics and automation, and expert systems.

AI skills are in high demand in Europe. In 2023, ARISA studied the AI roles and skills needed in Europe. In the job vacancies analysis, they clustered the requested skills into the following categories:

• AI general skills: AI uses many different programming languages. Languages such as Java, JavaScript, Python and C++ are in high demand. Traditional skills like SQL and Big Data are also still needed in the job market;
• ML and deep learning are a crucial part of AI skills. It is needed in all AI job roles and industries;
• Big data and data analytics are both important core aspects of AI;
• Cybersecurity and data security: In the context of AI, this relates to protocols, security certifications and how security is built within AI systems;
• Large Language Models (LLM): The demand for skills related to LLM is growing significantly. The application areas of LLMs are also evolving. 

Given the rapid growth of demand for AI in Europe, the market is expected to grow from €52.94 billion in 2025 to €215.93 billion in 2031. This translates to a CAGR of more than 26%. 

If you provide services in this sector, you should study the EU’s new Artificial Intelligence Act.

Data analytics and data science

Data analytics involves examining large sets of data to identify trends, patterns and insights that can lead to decision-making. Data science concerns a broader spectrum. It includes data analytics, as well as such tasks as data cleaning, visualisation and the development of models for predicting future trends.

As the amount of data produced in Europe grows, so does the need for services that help companies use such data to their advantage. As a result, the European market for big-data analytics and big-data science is projected to increase from about €67 billion in 2023 to about €195 billion in 2031. This translates to a CAGR of 14.3%.

Specialisation and/or a niche market focus offers opportunities in any sector

The ITO market can also be segmented into several sectors (or industries) known as ‘vertical markets’. Figure 10 presents the 2024 total global managed IT and business services ACV for awards of $5 million (USD) or more, per commercial sector. The combined record global market value of $42 billion was made up of around 70% ITO and 30% BPO contracts. This also applies to the $16.6 billion European market.

Source: ISG Index Insider, 2025

The largest market for ITO is the financial services (BFSI) sector. However, there are opportunities across various other industries. The key is to reduce competition by specialising in a specific sector, or even a specific service for a particular sector. This type of expertise gives you a competitive advantage in whichever sector you choose to focus on. Although staff can be trained in a new field, buyers generally prefer existing knowledge and experience. This also makes it easier to provide relevant references in the search for new buyers.

In general, there is less competition in niche markets. This leads to higher (and more stable) prices and buyer loyalty. The more you invest in specialising and finding your comfortable niche market, the better your chances of finding clients and partners.

European SMEs are your most suitable target group

As an SME, your best strategy is to focus on providing ITO services for other SMEs in Europe. This generally ensures a good match between you and your buyer in terms of characteristics like capacity and flexibility. As 99% of businesses in the EU are SMEs, and they employ over 100 million people, this market has huge potential. While outsourcing traditionally used to be reserved for large companies, SMEs are increasingly taking advantage of it.

Figure 11: Key differences in outsourcing practises

Source: Globally Cool

To effectively serve European SMEs, you should form a strategic partnership with a local IT company that already works with these buyers in the European market. 

Globally Cool carried out this study in partnership with Laszlo Klucs on behalf of CBI.

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