Global combined ACV for the third quarter up
40%, to a record $21.8 billion
Cloud-based as-a-service spend up 55%,
highest growth rate ever, to record $13.4 billion
Managed services climbs 22%, to a record
$8.4 billion, with record contracting activity
ISG raises its 2021 forecasts again for both
as-a-service and managed services
The global market for technology and business services grew at
its fastest pace ever in the third quarter, propelled by surging
demand for cloud computing and other digital capabilities,
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 third-quarter ACV for the combined global market (both
as-a-service and managed services) grew by 40 percent, to $21.8
billion—the highest quarterly growth rate for the combined market
since ISG began tracking as-a-service spending in 2014, and the
fourth consecutive quarter the global market has established a new
high for ACV.
“The demand environment for technology and business services is
as robust as we’ve ever seen,” said Steve Hall, partner and
president of ISG. “This is not just pent-up demand coming out of
the pandemic, but a real structural shift for the market as
enterprise customers accelerate their digital transformation
strategies, modernize their legacy environments and move to the
cloud. We see this trend continuing for the foreseeable future,
even against some economic headwinds. There is no let-up in
sight.”
The cloud-based as-a-service market reached a record $13.4
billion in the third quarter, up 55 percent against the prior
year—the highest quarterly growth rate ever, topping the previous
high of 50 percent in the first quarter of 2016. Within this
segment, both infrastructure-as-a-service (IaaS) and
software-as-a-service (SaaS) grew at a record pace, with IaaS up 57
percent, to a record $9.7 billion, and SaaS up 53 percent, to a
record $3.7 billion.
Managed services reached a record $8.4 billion, and its 22
percent growth rate was the highest in more than three years. IT
outsourcing (ITO) came in at $6.1 billion, up 18 percent from last
year, but down slightly from the previous quarter. Business process
outsourcing (BPO), meanwhile, surged 32 percent, to a record $2.3
billion.
A record 564 managed services contracts were awarded in the
third quarter, extending to four quarters the best 12-month stretch
ever for deal activity—coming out of a COVID-19 low in the second
quarter last year. During the third quarter, six mega-deals, each
worth more than $100 million, were signed.
Year-to-Date Performance
Through the first nine months of 2021, the combined global
market generated a record $59.8 billion of ACV, up 26 percent.
As-a-service, at a record $35.5 billion, was up 33 percent, its
highest growth rate in three years. IaaS hit a record $25.8 billion
of ACV, up 35.5 percent, also its highest growth rate in three
years, as enterprises seek the cost savings, agility and innovation
offered by cloud-based infrastructure. SaaS also established a new
record for quarterly ACV—$9.7 billion, up 26 percent—as providers
seek to establish longer-term, value-based relationships with
clients to mitigate the negative impact of price increases in an
inflationary environment.
Managed services, at a record $24.2 billion, was up 17
percent—the fastest growth rate for this segment since 2014. ITO
rose 12 percent, its best growth rate in three years, to a record
$18.3 billion, on record contracting activity of 1,187 deals. The
ITO market is being fueled by strong demand for application
development and maintenance (ADM) and cybersecurity services, even
as the infrastructure (data center) business declines. The BPO
segment soared 40 percent, to $5.9 billion, with contract awards up
39 percent year to date. Growth is being fueled by strong demand
for engineering/R&D and finance and accounting services.
Contact center and facilities management services are also growing
but have yet to climb back to their pre-pandemic highs.
Americas
The Americas region generated strong growth across the board in
the third quarter, both versus the prior year as well as quarter
over quarter, and set ACV records in all segments. Combined ACV
climbed 37 percent, to $11.6 billion, its highest level ever and
the first time the region has surpassed $10 billion in a quarter.
As-a-service ACV soared 51 percent over the prior year, to a record
$6.9 billion, the fastest growth rate for this segment since ISG
began tracking it in 2014. IaaS surged 53 percent, to a record $4.6
billion, and SaaS shot up 48 percent, to a record $2.4 billion.
Managed services advanced 21 percent, to a record $4.7 billion. ITO
jumped 26 percent, to a record $3.4 billion, and BPO was up 9
percent, to a record $1.3 billion.
Europe, Middle East and Africa (EMEA)
EMEA’s combined market reached an all-time high of $6.5 billion,
up 36 percent from the prior year, and up 4 percent over the second
quarter. As-a-service soared 59 percent, to a record $3.3 billion,
with IaaS and SaaS each also up 59 percent, to quarterly records of
$2.4 billion and $930 million, respectively. Managed Services,
meanwhile, rose 19 percent, to $3.2 billion, fueled by 7 percent
growth in ITO, to $2.3 billon, and 71 percent growth in BPO, to a
record $844 million, the latter on strong demand for engineering
and R&D services. The region produced strong growth across most
geographies, with the notable exception of its two largest
markets—DACH and the UK—both down for the quarter.
Asia Pacific
Asia Pacific generated $3.6 billion of combined market ACV in
the third quarter, up 60 percent over the prior year, but down 6
percent from a record second quarter. The as-a-service market
continued to establish new quarterly highs, up 62 percent, to a
record $3.1 billion overall, with IaaS up 60 percent, to a record
$2.7 billion, and SaaS up 69 percent, to a record $407 million.
Managed services ACV was $575 million, up 53 percent against a soft
year-ago quarter, but down 40 percent against a strong second
quarter. ITO followed the same pattern, with ACV of $405 million,
up 29 percent over last year, but down 51 percent against the
second quarter. BPO, on the other hand, advanced 178 percent versus
last year and 18 percent over the prior quarter, with strength in
engineering/R&D and industry-specific services.
2021 Forecast
ISG is forecasting the market for cloud-based services (IaaS and
SaaS) will grow 25 percent globally in 2021, up from its 21 percent
growth forecast last quarter. The firm also is raising its forecast
for managed services growth to 10.1 percent, up from its prior
forecast of 9 percent.
Commenting on the forecast, Hall said: “Our outlook for the
technology and business services market remains bullish, with the
volume of managed services deals in the pipeline indicating strong
buying intentions among enterprises seeking digital transformation
partners. The market is no longer dependent on larger deals and the
smaller deals, we believe, will eventually grow into larger
engagements as transformation efforts continue to pick up steam.
One headwind for this sector is the Great Resignation, which has
increased industry attrition and could slow growth.
“We believe the as-a-service market is in the early phase of its
maturity cycle. One near-term headwind is inflationary pressures.
If providers can successfully navigate potential price increases
with their client base or alter the pricing model to another
construct, such as outcomes-based pricing, the multiyear secular
growth drivers should remain quite healthy.”
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 76 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.
The 3Q21 Global ISG Index was presented during a conference call
and webcast today. To listen to an audio replay of the call and
view 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 700 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211012005672/en/
Press:
Will Thoretz, ISG +1 203 517 3119 will.thoretz@isg-one.com
Erik Arvidson, Matter Communications for ISG +1 617 755 2985
isg@matternow.com
Information Services (NASDAQ:III)
Historical Stock Chart
From Mar 2024 to Apr 2024
Information Services (NASDAQ:III)
Historical Stock Chart
From Apr 2023 to Apr 2024