Combined global ACV surges to record $12.4 billion
Traditional sourcing up 19%, to $7
billion; As-a-Service up 51%, to record $5.4 billion
All three regions post strong, double-digit growth
STAMFORD, Conn., July 11, 2018 /PRNewswire/ -- Global demand
for technology and business services continues to accelerate, with
as-a-service contract value climbing to another record high in the
second quarter and traditional sourcing value reaching $7 billion for only the fifth time in history,
according to the latest state-of-the-industry report from
Information Services Group (ISG) (Nasdaq: III), a leading global
technology research and advisory firm.
Data from the ISG Index™, which measures commercial outsourcing
contracts with annual contract value (ACV) of $5 million or more, show second-quarter ACV for
the combined global market (including both as-a-service and
traditional sourcing) surged 31 percent, to a record $12.4 billion. That figure includes traditional
sourcing ACV of $7 billion, up 19
percent, and record as-a-service ACV of $5.4
billion, up 51 percent and nearly double that of two years
ago. It was the first time as-a-service ACV surpassed $5 billion in a quarter.
The continuing surge in as-a-service value was fueled this
quarter by a 58 percent increase in Infrastructure-as-a-Service
(IaaS), to $3.9 billion, and a 35
percent increase in Software-as-a-Service, to $1.5 billion, as enterprises continue to move
more workloads to the cloud.
"Global demand for outsourced IT and business services continues
to expand, helped by robust economic trends and an unrelenting
enterprise focus on all things digital," said Steve Hall, partner and president of ISG. "There
were some initial concerns the as-a-service revolution would eat
away at the market for traditional sourcing services, but that
hasn't been the case. The combined global market is actually
getting bigger, with steady quarter-over-quarter ACV growth during
the last year bringing us to this new high-water mark. We're in a
very strong, sustained market right now."
For the first half, global combined ACV reached an all-time high
of $23.6 billion, up 17 percent over
the same period last year. Growth was paced by record as-a-service
ACV of $10.1 billion, up 39 percent.
Traditional sourcing ACV was up 5 percent, to $13.5 billon, on record volume of 946 contracts.
Most (61 percent) were smaller contracts – in the $5 million to $10
million range – up 17 percent over the prior-year
period.
In the first half, financial services remained the largest
global market for combined sourcing services, with ACV of
$5.5 billion (up 28 percent),
followed by business services, with ACV of $3.8 billion (up 30 percent), and manufacturing,
with ACV of $3.1 billion (down 7.5
percent). The fastest-growing sector was healthcare and pharma,
which saw its ACV climb 58.3 percent, to $2.5 billion. Retail was the
second-fastest-growing sector, with ACV of $1.6 billion, up 57.9 percent.
Americas
The Americas, the world's largest combined sourcing market,
generated combined ACV of $5.9
billion in the second quarter, up 33 percent. Traditional
sourcing, at $3.1 billion, was up 25
percent, continuing a record string of four straight quarters above
the $3 billion mark. Growth was
fueled by applications outsourcing and industry-specific business
process outsourcing. Meanwhile, records abound in the as-a-service
space. As-a-service sourcing reached a record $2.8 billion, up 44 percent, and its share of
combined-market ACV climbed to 48 percent, a new high. The two
components of as-a-service – IaaS ($1.87
billion, up 50 percent) and SaaS ($951 million, up 32 percent) – both established
new quarterly highs.
Europe, Middle East and Africa (EMEA)
The EMEA market rebounded from a soft first quarter to post
combined second-quarter ACV of $4.6
billion, up 23 percent over the prior year. Traditional
sourcing, which continues to represent the lion's share of the
overall market, advanced 11 percent, to $3.1
billion, showing strength in the UK, the Nordics and
Southern Europe. It was the first
time traditional sourcing ACV topped the $3
billion level in the last 18 months. Although as-a-service
represented only a third of the region's combined sourcing market,
it was its fastest-growing segment, up 56 percent, to $1.5 billion, with both the IaaS and SaaS
portions reaching record highs and contributing equally to the
growth.
Asia Pacific
Asia Pacific's combined ACV
rose 44 percent, to $1.9 billion, the
best such total since ISG introduced this metric in 2016. The
as-a-service market broke through the $1
billion level for the first time, with ACV of $1.1 billion, up 65 percent, the fastest growth
of any region. Traditional sourcing, meanwhile, turned in its best
quarter in four years, with ACV of $865
million, up 25 percent. Growth was paced by the banking,
financial services and insurance sector and the transportation
industry, application maintenance and design (ADM) services, and
the Australia/New Zealand and North Asia markets.
Forecast
"The growth of public cloud is accelerating; we now expect
growth to exceed 45 percent for the full year, contributing to the
30 percent growth we are forecasting for IaaS overall," said Hall.
"We are also increasing our growth forecast for SaaS to 16 percent,
up slightly from the 15 percent we forecast in April. We're also
more bullish on traditional sourcing, raising our growth forecast
for the year to 4.4 percent, up from 2 percent in April."
About the ISG Index™
Now in its 63rd consecutive quarter, the ISG Index™ provides a
quarterly review of the latest sourcing industry data and trends
for clients, providers, analysts and the media. For more than 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. 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.
The 2Q 2018 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 presentation slides, 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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