IaaS and SaaS demand continues to climb to
record highs, but managed services growth slows after strong second
quarter
Record demand for cloud computing continued to drive Asia
Pacific’s IT and business services market in the third quarter,
even as growth in traditional managed services slowed from a strong
second quarter, 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 cloud-based as-a-service ACV reached a
record US $3.1 billion in the third quarter, up 62 percent versus
the prior year when demand was weaker due to the pandemic, but up
only 5 percent from its previous record high in the second quarter.
Cloud services accounted for more than 84 percent of Asia Pacific’s
IT and business services spending in the third quarter, by far the
greatest percentage of any region.
Within the as-a-service segment, infrastructure-as-a-service
(IaaS), at a record US $2.7 billion, was up 60 percent year over
year, but only 3 percent sequentially, while software-as-a-service
(SaaS), at a record US $407 million, soared 69 percent against the
prior year, and was up 18 percent versus the second quarter.
Traditional managed services also advanced against a weaker 2020
third quarter, with ACV of US $575 million, up 53 percent, but down
40 percent from the second quarter this year. IT outsourcing (ITO)
rose 29 percent, to US $405 million, but was off 51 percent versus
the second quarter. Business process outsourcing (BPO), at US $170
million, shot up 178 percent versus last year and rose 18 percent
over the second quarter, with strength in engineering/R&D and
industry-specific services.
The region saw 53 managed services contract awards in the third
quarter, up 26 percent over the prior year. Most major markets,
with the exception of China, posted double-digit gains in managed
services ACV in Q3 versus the prior year.
The combined market, encompassing both cloud and traditional
services, stood at US $3.6 billion in the third quarter, up 60
percent over the prior year, but down 6 percent from a record
second quarter.
“The past two quarters have seen the best year-over-year
quarterly growth rates in Asia Pacific since ISG began to measure
cloud computing in 2014,” said Scott Bertsch, partner and regional
leader, ISG Asia Pacific. “Much of that is attributable to
skyrocketing demand for cloud services to support digital
transformation. Although traditional managed services hit a high
mark last quarter coming out of the pandemic, it couldn’t sustain
that level of growth for two consecutive quarters.”
Year-to-Date Performance
Over the first nine months of 2021, the combined market
generated a record US $10.4 billion of ACV, up 45 percent.
As-a-service, at a record US $8.5 billion, was up 50 percent, with
IaaS reaching a record US $7.4 billion, up 52 percent, and SaaS
hitting a record US $1.1 billion, up 37 percent.
Managed services, at US $1.9 billion, was up 26 percent. ITO
reached US $1.5 billion, up 15 percent, with growth in both
infrastructure and applications development and maintenance (ADM).
BPO advanced 87 percent, to a record US $421 million.
Notable Deals
In the IaaS segment, AWS won deals in the third quarter with
Axis Bank, the third-largest private-sector bank in India, to
migrate most of Axis’ on-premises data center infrastructure, and
with RBL Bank, also in India, for AI banking solutions. In the SaaS
segment, Oracle won awards with India telecoms company Bharti
Airtel and with Taiwan-based computer maker Acer. ServiceNow inked
a deal with Asahi, the Japanese drinks and food company, which
chose the Now Platform to provide service catalogues.
In ITO, Accenture signed a deal with Japan’s Chubu Electric
Power Group to transform its operations, and with Kubota, the
Japanese equipment manufacturer, to accelerate migration of legacy
systems to the Microsoft Azure cloud. Infosys also signed a
multiyear deal with Australia’s Ausgrid, an electricity
distribution company, for cloud modernization leveraging Microsoft
Azure.
2021 Global 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.
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.
For more information about the ISG Index, 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20211110006478/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
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