Asia Pacific’s IT, Business Services Market Up in Q1, But Growth Remains Uneven, ISG Index™ Finds
Combined market, XaaS and managed services segments each up 28% for the quarter, but down versus strong Q4
The Asia Pacific ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of US $5 million or more, shows full-year ACV for the combined market—including both as-a-service (XaaS) and managed services—reached US $4.2 billion, up 28 percent, but that was the region’s lowest growth rate in the last four quarters. First-quarter ACV was off 10 percent from the region’s fourth-quarter high of US $4.7 billion, the steepest quarter-over-quarter drop in more than two years.
“This is the fourth straight quarter the region has produced ACV of at least US $4 billion, but sequential growth has been uneven,” said Scott Bertsch, partner and regional leader, ISG Asia Pacific. “It’s been a bit of a roller coaster ride recently, with each new quarterly high followed by a sequential drop in ACV.”
As with the broader market, XaaS spending rose 28 percent in the first quarter, to US $3.7 billion, but was down 1 percent from the fourth quarter. Infrastructure-as-a-Service (IaaS) rose 30 percent, to US $3.3 billion, but was down 1 percent against the prior quarter, while Software-as-a-Service (SaaS) advanced 14 percent over 2021, to US $400 million, but was flat with Q4.
Managed services, likewise, grew 28 percent in the first quarter, to US $498 million, but dropped 47 percent against the fourth quarter. The 28 percent year-over-year growth rate was the slowest in the last four quarters, with the three preceding quarters averaging 54 percent annual growth.
Within managed services, IT outsourcing (ITO) was up 31 percent, to US $370 million, but was down 50 percent against Q4. Business process outsourcing (BPO) grew 18 percent, to US $128 million, but fell 33 percent versus the fourth quarter.
The region generated 45 managed services contract awards in the first quarter, up 50 percent versus a soft first quarter last year, but down 26 percent versus a much-stronger Q4. The year-over-year growth in volume was driven entirely by the smallest band of contract awards measured by the ISG Index - those falling within the US $5 million to US $10 million range. Contract awards at this level were up 94 percent versus last year.
From a geographical perspective, Australia-New Zealand, at US $114 million of managed services ACV, was down 5 percent year on year, and off 77 percent against a very strong Q4. Both South Korea (up 67 percent) and Japan (up 25 percent) advanced versus the prior year off a small base, while the ASEAN region was up significantly as it posted its third straight quarter with ACV of more than US $100 million.
2022 Global Forecast
ISG is forecasting the global market for cloud-based XaaS (IaaS and SaaS) will grow 22 percent for the year, up from its 20 percent forecast last quarter, while the global market for managed services is expected to grow 5.1 percent, unchanged from last quarter’s forecast.
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 78 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. In 2016, the ISG Index was expanded to include coverage of the fast-growing as-a-service market, measuring the significant impact cloud-based services are having on digital business transformation. ISG also provides ongoing analysis of automation and other digital technologies in its quarterly ISG Index presentations.
For more information about the ISG Index, visit this webpage. https://isg-one.com/research/isg-index
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 800 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 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 1,300 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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