Managed services still growing versus prior
year, but down 43% from second quarter
The market for IT and business services in Asia Pacific
continued to grow in the third quarter on solid demand for both
managed and cloud-based services, although it decelerated from a
strong Q2, 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 third-quarter ACV for the combined market
(both cloud-based XaaS and managed services) rose 10 percent versus
the prior year, to US $4.6 billion, but was down 5 percent versus
the second quarter.
Demand for managed services remained solid, with ACV up 17
percent over the prior year, to US $794 million, but down 43
percent from the second quarter. A total of 57 managed services
contracts were awarded, up 36 percent year on year but down 30
percent quarter over quarter. New scope awards propelled the
market, with volume up 47 percent and ACV up 18 percent versus the
prior year.
Demand for cloud-based services grew 8 percent, to US $3.8
billion, and was up 10 percent sequentially from the second
quarter. Although quarterly demand for XaaS has not exceeded the
US $4 billion level since the second quarter of 2022, it was
the third time in the last four quarters that ACV exceeded US $3.5
billion.
“After two consecutive quarters with managed services ACV of
more than US $1 billion, Asia Pacific has settled back into a more
typical US $800 million range,” said Michael Gale, partner and
regional leader, ISG Asia Pacific. “Growth in the region has always
been driven more by cloud services, given the market’s maturity and
cloud-first mindset, and that segment is rebounding after a
significant slump the last two years.”
Within managed services, IT outsourcing (ITO) ACV rose 18
percent, to US $622 million, driven by surging demand for
application development and maintenance (ADM) services, up 238
percent in the quarter. Business process outsourcing (BPO),
meanwhile, was up 12 percent, to US $173 million, led by strong
growth in engineering, research and development (ER&D)
services.
From a geographic perspective, demand for managed services was
up by triple digits in China and Japan, and by double digits in
South Korea. The region’s two largest markets, Australia/New
Zealand (ANZ) and India, meanwhile, moved in opposite directions,
with ANZ up 79 percent in the quarter and India down 61 percent,
its weakest quarter since the first quarter of 2022.
By industry, banking, financial services and insurance (BFSI),
energy and travel and transportation all moved to the upside, while
manufacturing pulled back 19 percent for the quarter.
Within the XaaS segment, infrastructure-as-a-service (IaaS) ACV
was up 8 percent, at US $3.3 billion, while software-as-a-service
(SaaS) ACV rose 14 percent, to US $444 million.
Nine-Month Results
Asia Pacific’s combined market ACV rose 13 percent versus the
prior year, to US $14.2 billion, a significant turnaround from the
same period last year, when the market was down 17 percent.
However, the market year-to-date is still off 6 percent from a
record first nine months of 2022.
Managed services produced its best first nine months ever, with
ACV of nearly US $3.2 billion, up 24 percent year on year. ITO ACV
was up 8 percent, to US $2.3 billion, while BPO ACV surged 91
percent, to US $946 million.
On the cloud side, XaaS ACV rose 11 percent, to nearly US $11.0
billion. IaaS climbed 10 percent, to US $9.6 billion, and SaaS
advanced 13 percent, to US $1.3 billion.
2024 Global Forecast
For the full year, ISG is maintaining its forecast of 2 percent
revenue growth for managed services, and 14 percent revenue growth
for XaaS. The firm sees stronger growth in 2025.
“Despite a strong third quarter, we are maintaining our
full-year forecast due to continued mixed signals in the market,
especially softness in the BFSI sector,” said Gale. “Recent rate
cuts by the Fed and European Central Bank are expected to boost IT
spending in the coming year, and other factors, such as the growing
interest in GenAI, increased server shipments and the
reacceleration of hyperscaler revenues, all point to a more
positive outlook in 2025.”
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 88 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. For more information about the ISG Index, or to view a
replay of the 2Q24 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, 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20241020256748/en/
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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