Combined market tops US $5B, breaks string
of 5 straight down quarters
Managed services spending up 18% vs. prior
year, XaaS up 27%
Asia Pacific’s IT and business services market delivered a
resurgent performance in the first quarter, with spending at a
level last seen almost two years ago, according to the latest
state-of-the-industry report from Information Services Group (ISG)
(Nasdaq: III), a leading global technology research and advisory
firm.
The Asia Pacific ISG Index™, which measures commercial
outsourcing contracts with annual contract value (ACV) of US $5
million or more, shows ACV for the combined market—both managed
services and as-a-service (XaaS)—climbed 25 percent versus the
prior year, to just over US $5 billion, the first time the region
topped the US $5-billion level since the second quarter of 2022. It
also broke a string of five straight quarters the region produced
negative year-over-year results.
Managed services ACV rose 18 percent, to just over US $1
billion, versus the prior year, and was up 21 percent sequentially
from the fourth quarter of 2023. Business process outsourcing (BPO)
drove all the growth in the first quarter, up 72 percent to US $399
million. IT outsourcing (ITO), meanwhile, declined 1 percent, to US
$643 million.
A total of 66 managed services contracts were awarded in the
first quarter, up 12 percent year on year. The volume of smaller
deals, those under US $30 million, rose 2 percent. New-scope awards
accounted for more than 80 percent of the region’s managed services
ACV, while the ACV of contract restructurings fell more than 60
percent.
ACV in the XaaS segment advanced 27 percent, to US $4.0 billion,
led by growth in infrastructure-as-a-service (IaaS), up 30 percent,
to US $3.6 billion. Software-as-a-service (SaaS) was up 4 percent,
to US $427 million.
Results by Industry, Geography
Among industries, the banking, financial services and insurance
(BFSI) sector led the way, generating ACV of US $434 million, more
than double that of the prior year, and accounting for 137 percent
of the region’s managed services growth in the quarter.
Manufacturing and telecommunications spending was down
significantly, while other industries generated gains, albeit off
small bases.
By geography, all markets in the region were positive, except
for its largest market, Australia-New Zealand, which declined 15
percent year on year. India, Japan, Southeast Asia and China were
all up by double digits.
“As we noted last quarter, Asia Pacific has bottomed out and is
poised for a rebound in 2024,” said Michael Gale, partner and
regional leader, ISG Asia Pacific. “The region is off to a strong
start, with double-digit managed services growth led by the BFSI
sector and BPO overall. ACV for cloud-based services surpassed the
US $4 billion level for the first time since the second quarter of
2022 and produced its second straight quarter of double-digit
growth. Early indications are that Asia Pacific is leading the way
in a global rebound of IT and business services spending among the
three regions.”
2024 Global Forecast
ISG is forecasting 3 percent growth for managed services, down
125 basis points from its January forecast, and maintaining its
forecast of 15 percent revenue growth for XaaS in 2024.
“Looking ahead, economic conditions are forecasted to be less
volatile as the year progresses and inflation continues to slow,
but challenges persist,” Gale said.
“In this environment, outsourcing could see a boost as companies
seek to balance cost management and service quality. GenAI,
meanwhile, is poised to be a growth catalyst, with large
hyperscalers expected to manage increasing workloads. The data
layer, integral for training AI models, presents a prime
opportunity for service providers.”
About the ISG Index™
The ISG Index™ is recognized as the authoritative source for
marketplace intelligence on the global technology and business
services industry. For 86 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.
The 1Q24 Global ISG Index results were presented during a
webcast on April 11. To view a replay of the webcast and download
presentation slides, visit this webpage.
About ISG
ISG (Information Services Group) (Nasdaq: III) is a leading
global technology research and advisory firm. A trusted business
partner to more than 900 clients, including more than 75 of the
world’s top 100 enterprises, ISG is committed to helping
corporations, public sector organizations, and service and
technology providers achieve operational excellence and faster
growth. The firm specializes in digital transformation services,
including AI and automation, cloud and data analytics; sourcing
advisory; managed governance and risk services; network carrier
services; strategy and operations design; change management; market
intelligence and technology research and analysis. Founded in 2006,
and based in Stamford, Conn., ISG employs more than 1,600
digital-ready professionals operating in more than 20 countries—a
global team known for its innovative thinking, market influence,
deep industry and technology expertise, and world-class research
and analytical capabilities based on the industry’s most
comprehensive marketplace data. For more information, visit
www.isg-one.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240416030970/en/
Press: Will Thoretz, ISG +1 203 517 3119
will.thoretz@isg-one.com
Julianna Sheridan, Matter Communications for ISG +1 978-518-4520
isg@matternow.com
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