STAMFORD, Conn., July 12, 2017 /PRNewswire/ -- Surging demand
for as-a-service solutions drove overall growth in the global
commercial sourcing market in the second quarter, with such
cloud-based platform services now accounting for more than 40
percent of global spending – and climbing – 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 ISG Index™, which measures commercial outsourcing contracts
with annual contract value (ACV) of $5
million or more, shows second-quarter ACV for the combined
global market (including both as-a-service and traditional
sourcing) reached $9.3 billion, up 9
percent over last year, but down 11 percent from the record first
quarter of 2017.
The growth in demand for as-a-service solutions continues to
outstrip that of traditional services. During the quarter,
as-a-service (Infrastructure-as-a-Service and
Software-as-a-Service) ACV climbed 32 percent, to $3.8 billion, while traditional sourcing ACV
declined 3 percent, to $5.5
billion.
As-a-service now accounts for 41 percent of the global sourcing
market, and ISG forecasts continued double-digit growth in this
segment for the balance of the year, with traditional market
spending remaining essentially flat.
"The demand for as-a-service solutions continues to grow so
rapidly that it won't be long before as-a-service spending reaches
parity with traditional sourcing and even eclipses it," said
Steve Hall, partner and global
leader, ISG Index™.
Despite this reversal in fortune, Hall points out the overall
sourcing market remains healthy. "With a record first quarter and a
solid second quarter, combined global spending for sourcing
services, as measured by annual contract value, reached an all-time
high of $19.8 billion in the first
half, up 10 percent over last year. At this rate, combined ACV for
all of 2017 could exceed last year's total by nearly $3 billion."
Spending on traditional sourcing, although down overall in the
quarter, continued to grow in Europe, Middle
East and Africa (EMEA) and
was up by a double-digit percentage in Asia Pacific. The number of traditional
sourcing contracts signed in the quarter – 427 – was the second
most ever, with much of the activity in information technology
outsourcing (ITO), particularly the applications space.
In the first half, global ITO spending reached $9.3 billion, up 7 percent, on 623 contract
awards, a record for a half year. Business process outsourcing
(BPO), meanwhile, slumped 27 percent, to $2.4 billion. On the as-a-service side,
Infrastructure-as-a-Service (IaaS) ACV soared 62 percent, to
$6.1 billion, while
Software-as-a-Service (SaaS) slowed 9 percent, to $2.0 billion.
Americas
ACV in the Americas region reached $4.5
billion for the quarter, up 2 percent, with as-a-service
growth of 27 percent offsetting a 13 percent decline in traditional
sourcing. The Americas is now essentially a 50-50 market, with the
region's spending about evenly split between traditional and
as-a-service sourcing over the last four quarters.
In the first half, Americas combined ACV reached $9.5 billion, up 6 percent over the prior-year
period. Spending consisted of $5.0
billion in traditional sourcing (down 8 percent), including
$4.0 billion in ITO (even with the
prior year) and $0.9 billion in BPO
(down 32 percent). On the as-a-service side, ACV was $4.5 billion for the half (up 27 percent),
including $3.2 billion in IaaS (up 53
percent) and $1.3 billion in SaaS
(down 10 percent).
ACV in financial services, the region's top industry for
sourcing services, reached a record $2.1
billion, up a combined 15 percent in the first half, and up
35 percent in the as-a-service space. Manufacturing, previously
lagging, is gaining momentum, with ACV up 35 percent in both the
combined and as-a-service markets in the first half, driven by
transformation initiatives.
Europe, Middle East and Africa (EMEA)
EMEA generated ACV of $3.5 billion
in the second quarter, up 13 percent. Unlike the Americas and
Asia Pacific, the region continues
to be more dependent on traditional sourcing, which grew 5 percent
in the quarter, to $2.5 billion, on
the strength of 188 contract awards, the second most ever for a
quarter. ACV in the as-a-service segment grew 40 percent for the
quarter.
In the first half, EMEA's combined spending reached $7.9 billion, up 13 percent over the same period
last year. A record $2.2 billion was
spent on as-a-service sourcing, up 48 percent, fueled by an 80
percent increase in IaaS, offset partially by a 7 percent decline
in SaaS. Traditional sourcing, at $5.7
billion, was up 3 percent, driven by a 9 percent increase in
ITO spending, to $4.4 billion, and a
record 270 contracts in the first half. BPO, meanwhile, fell 10
percent, to $1.4 billion.
Financial services is, like the Americas, EMEA's largest
sourcing industry. This vertical generated $2.2 billion in ACV, up 31 percent for the first
half. Energy is picking up steam, with ACV up 44 percent in the
half, while the telecom and media sector grew 17 percent.
Asia Pacific
Asia Pacific reached a record
$1.3 billion in combined ACV in the
second quarter, up 24 percent. Driven by a record 66 contracts in
the quarter, traditional sourcing ACV rose 11 percent, to
$659 million, the highest spending
since the fourth quarter of 2014. As-a-service spending reached
$679 million, the second-best quarter
ever, up 42 percent from the prior year.
For the first half, combined spending reached $2.4 billion, up 20 percent, propelled by a
record $1.4 billion in ACV from the
as-a-service segment. Traditional sourcing, meanwhile, slid 6
percent to $1.0 billion. As-a-service
spending was driven by $1.2 billion
in IaaS ACV, up 64 percent, offset partially by a 4 percent decline
in SaaS, to $216 million. In
traditional sourcing, ITO spending, at $878
million, was up 43 percent, while BPO, at $136 million, was down 70 percent.
By industry, business services generated nearly one-third of the
region's ACV in the first half – $431
million, up 28 percent, with as-a-service spending
accounting for lion's share (87 percent) of that total. Financial
services contributed a similar level of spending – $449 million – also up 41 percent in the first
six months, with just over half of that spending coming from
as-a-service sourcing.
Forecast
"Looking ahead to the rest of 2017, we forecast double-digit
growth in the as-a-service segment in both the Americas and
Asia Pacific, with IaaS continuing
to outpace SaaS," said Hall. "Traditional sourcing in these regions
is expected to remain flat. In EMEA, we expect a strong second
half, with traditional sourcing spending growing by a
mid-single-digit percentage for the year, even as IaaS and SaaS
spending remains fairly flat."
About the ISG Index™
Now in its 59th consecutive quarter, the ISG Index™ provides a
quarterly review of the latest sourcing industry data and trends
for clients, service providers, analysts and the media. For nearly
15 years, it has been the authoritative source for marketplace
intelligence related to outsourcing transaction structures and
terms, industry adoption, geographic prevalence and service
provider performance.
The 2Q 2017 Global ISG Index™ was presented during a conference
call and webcast for media and analysts today. To listen to an
audio replay of the call and view the presentation slides and
infographic, please visit
http://www.isg-one.com/research/research-detail-page/isg-index.
About ISG
ISG (Information Services Group) (NASDAQ: III) is a leading
global technology research and advisory firm. A trusted business
partner to more than 700 clients, including 75 of the top 100
enterprises in the world, 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; technology
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 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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SOURCE Information Services Group, Inc.