Global IT and Business Services Market Hits Record High in Q4 2024, Driven by AI and Cloud Demand

Americas Demand for IT, Business Services Hits Record High in Q4, ISG Index™ Finds - Information Servs Gr (NASDAQ:III)

Combined market up 21%, as AI drives surging demand for cloud services ISG forecasts 4.5% managed services growth, 18% XaaS growth globally in 2025 The Americas market for IT and business services hit a record high in the fourth quarter, powered by large managed services contracts and surging, AI-driven demand for cloud services, according to the latest state-of-the-industry report from Information Services Group (ISG) III, a leading global technology research and advisory firm. The Americas ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, shows fourth-quarter ACV for the combined market -- including both managed services and cloud-based as-a-service (XaaS) -- climbed 21 percent, to a record $14.4 billion. Versus the third quarter, combined ACV was up 10 percent sequentially. "The Americas market saw renewed signs of strength in the fourth quarter," said Todd Lavieri, vice chairman and president of ISG Americas and Asia Pacific. "Encouraged by improving economic conditions, and in some cases making up for some previously deferred projects, companies are increasing their investments in IT and business services, signing large contracts to reaccelerate their digital transformations and spending more on cloud services to further their AI ambitions. "In particular, we're seeing increased signs of activity in the BFSI [banking, financial services and insurance] sector, as those industries continue to look for ways to drive more efficiency, upgrade their platforms, and enhance cybersecurity and customer experience." Lavieri said ISG expects the Americas market for IT and business services to strengthen in 2025. "We think the growth we saw in the fourth quarter will continue, especially with a new U.S. administration coming in that promises a more favorable business environment. The Federal Reserve continues to seek a balance between supporting economic growth, while cooling the embers of inflation. The consensus forecast suggests the Fed will continue to slowly and steadily reduce key borrowing rates this year. That should stimulate tech spending, as companies continue to modernize their infrastructure and adopt AI for greater efficiency and innovation." Q4 Results by Segment Fourth-quarter managed services ACV, at $5.7 billion, rose 3 percent versus the prior year and 11 percent against the third quarter. A total of 360 contracts were awarded, flat with the prior year, including eight mega-deals (contracts with annual value of at least $100 million), the most awarded in a quarter since the first quarter of 2006. The total ACV of the eight mega-deals signed in the fourth quarter was $1.3 billion, up 41 percent from the six mega-deals signed in the prior year. At the other end of the spectrum, 211 smaller contracts (those in the $5 million to $9 million range) were awarded during the quarter, up nearly 10 percent from the prior year. The number of new scope awards, at 234, was up 5 percent, and the ACV of those awards was up 19 percent. Within managed services, IT Outsourcing (ITO) ACV was up 2 percent, to $4.3 billion, driven by growth in data center services, which offset a decline in application development and maintenance services. Business process outsourcing (BPO), meanwhile, advanced 6 percent, to $1.3 billion, on the strength of finance and accounting and facilities management services. In the cloud-based XaaS segment, ACV soared 36 percent, to $8.7 billion, fueled by 53 percent growth infrastructure-as-a-service (IaaS), to $6.2 billion, and 6 percent growth in software-as-a-service (SaaS), to $2.5 billion. Full-Year Results For the full year, the Americas combined market generated a record $51.8 billion of ACV, up 9 percent -- a complete reversal from 2023, when the combined market was down 7 percent. Managed services ACV was down 5 percent, to $20.7 billion, as the number of contracts (1,428) declined by 3 percent, including lower volumes of mega-deals, new-scope awards and restructured contracts. Within managed services, ITO slid 6 percent, to $15.1 billion, while BPO declined 2 percent, to $5.6 billion. Among major industries, ACV in the all-important BFSI sector was down 3 percent for the year, boosted by 21 percent growth in the fourth quarter. Manufacturing ACV was up 24 percent for the year, while travel, transport and leisure was up 70 percent, as other sectors saw declines. ACV for XaaS climbed 20 percent, to $31.1 billion, compared with a 16 percent decline in 2023. IaaS rose 31 percent, to $21.6 billion, and SaaS was up 1 percent, to $9.5 billion. XaaS represented 60 percent of combined market ACV last year, up from 54 percent in 2023. 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, led by the Americas, with Europe to follow later in the year," said Lavieri. "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) 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. View source version on businesswire.com: https://www.businesswire.com/news/home/20250121470644/en/ Press Contacts: Will Thoretz, ISG +1 203 517 3119 [email protected] Julianna Sheridan, Matter Communications for ISG +1 978-518-4520 [email protected] IIIInformation Services Group Inc$3.220.63%WatchlistOverviewMarket News and Data brought to you by Benzinga APIs

Asia Pacific Tech Services Market Fueled by Strong Demand for Managed and Cloud Services in Q4: ISG Index™ By Investing.com

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 SYDNEY--(BUSINESS WIRE)--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: 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.