Combined market ACV up 23%, with managed
services up 33%, XaaS up 20%
ISG forecasts 4.5% managed services growth,
18% XaaS growth globally in 2025
Asia Pacific’s market for IT and business services was fueled in
the fourth quarter by double-digit growth in cloud and managed
services, driven in part by growing demand for AI, 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 fourth-quarter ACV for the combined market
(both cloud-based XaaS and managed services) rose 23 percent versus
the prior year, to US $5.5 billion. It was the fourth straight
quarter Asia Pacific’s combined market rose year on year, with
quarterly growth averaging more than 16 percent during that span.
Compared with the third quarter, the market was up 20 percent
sequentially.
Managed services ACV soared 33 percent, to US $1.1 billion, and
was up 45 percent from the prior quarter. A total of 72 contracts
were awarded in the fourth quarter, up 29 percent against the prior
year. Within managed services, IT outsourcing (ITO) rose 25
percent, to US $825 million, on the strength of application
development and maintenance (ADM) spending, while business process
outsourcing (BPO) climbed 59 percent, to US $320 million, supported
by growth in customer engagement and engineering, research and
development services.
In the cloud space, XaaS ACV rose 20 percent, to US $4.3
billion, driven by 20 percent growth in infrastructure-as-a-service
(IaaS), to US $3.8 billion, and 20 percent growth in
software-as-a-service (SaaS), to US $527 million.
“Companies increasingly are turning to service providers,
seeking specialized expertise and capabilities to accelerate their
digital transformations,” said Michael Gale, partner and regional
leader, ISG Asia Pacific. “The growth in managed services in 2024
has been extraordinary, with ACV exceeding US $1 billion in three
of the four quarters last year. That’s never happened before.”
Gale pointed to rising interest in AI as a catalyst for
continuing growth in cloud demand. “Enterprises are migrating more
workloads to the cloud, not only for efficiency and cost savings,
but to secure more data processing capacity to achieve their AI
ambitions,” he said.
Full-Year Results
For the full year, Asia Pacific’s combined market generated
record ACV of US $19.7 billion, up 16 percent versus the prior year
and just slightly ahead of the previous record set in 2022. By
comparison, the combined market was down 13 percent year on year in
2023.
Managed services ACV rose 26 percent, to a record US $4.4
billion, beating the previous record set in 2012. A total of 276
managed services contracts were awarded in 2024, up 28 percent. The
ACV of new-scope contracts advanced 27 percent, to a record US $3.3
billion.
Within managed services, ITO ACV rose 12 percent, to a record US
$3.1 billion, led by growth in ADM, data center and end user
computing services. BPO soared 82 percent, to US $1.3 billion, with
strong growth in customer engagement, HR outsourcing and
industry-specific services.
The XaaS segment advanced 13 percent, to US $15.3 billion of
ACV, reversing course after a 16 percent drop in 2023. IaaS was up
13 percent, to US $13.4 billion, while SaaS grew 16 percent, to US
$1.9 billion.
By geography, every market was up for the year except India,
which was down 36 percent. Both Australia-New Zealand, up 16
percent, to US $1.4 billion, and Japan, up more than 200 percent,
to US $1.1 billion, posted their best years ever, while China, up
80 percent, to US $411 million, had its second-best result ever.
Japan and China benefitted from larger contract awards.
By industry vertical, all sectors generated positive results,
with the exception of manufacturing, which pulled back 8 percent.
BFSI, the region’s largest industry for outsourcing, advanced 57
percent versus the prior year, while the region’s third-largest
vertical, media and telecommunications, increased 13 percent for
the year.
2025 Global Forecast
For the full year, ISG is forecasting 4.5 percent revenue growth
for managed services, up from 1.7 percent growth in 2024, and 18
percent revenue growth for XaaS, in line with the prior year.
“Globally, we expect a gradual recovery in enterprise demand for
IT and business services,” said Gale. “Tech modernization and AI
adoption will act as market tailwinds, and we expect a recovery in
BFSI spending this year.”
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 89 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 4Q24 Global ISG Index results were presented during a
webcast January 16. 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, 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/20250121852271/en/
Press Contacts: 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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