Global Demand for IT and Business Services at Highest Level Ever in Q1, ISG Index™ Finds

STAMFORD, Conn.–()–Global demand for know-how and enterprise providers continues to rise, reaching an all-time excessive within the first quarter, with a rising pipeline of offers signaling continued growth in 2021 because the economic system begins to emerge from the pandemic, the newest state-of-the {industry} report from Information Services Group (ISG) (Nasdaq: III), a number one international know-how analysis and advisory agency, finds.

Data from the ISG Index™, which measures industrial outsourcing contracts with annual contract worth (ACV) of $5 million or extra, present first-quarter ACV for the mixed international market (each as-a-service and managed providers) reached a report $17.1 billion, up 11 p.c over final yr and up four p.c from the fourth quarter. It was the third consecutive quarter of world development following the pandemic-related drop within the second quarter of 2020.

“The demand environment has improved steadily over the past three quarters,” mentioned Steve Hall, associate and president, ISG. “Deals are filling the pipeline as economies loosen pandemic restrictions, and enterprises continue to make digital transformation a business imperative. Providers are focused on meeting that need by concentrating on cloud modernization, cost optimization, and helping customers create resilient and agile operations and personalized omnichannel experiences.”

The cloud-based as-a-service market rose 15 p.c, to a report $9.9 billion, within the first quarter, however development decelerated from the fourth quarter, when it was up 26 p.c yr over yr. Managed providers ACV, in the meantime, reached $7.2 billion within the first quarter, up 7 p.c yr over yr, outperforming expectations as a result of a second consecutive quarter of robust development in Europe.

Within the as-a-service section, infrastructure-as-a-service (IaaS) generated a report $7.2 billion of ACV, up 18 p.c versus the prior yr, however slowing from its 36 p.c development fee within the fourth quarter. Software-as-a-service (SaaS) produced a report $2.7 billion of ACV, up 7 p.c yr over yr and 10 p.c quarter over quarter.

Within managed providers, IT outsourcing (ITO) ACV was $5.Eight billion, up 1 p.c from final yr and down barely from the earlier quarter, as energy in software improvement and upkeep (ADM) providers—up 7 p.c versus the prior yr on a report variety of offers and up 29 p.c versus the prior quarter—was largely offset by a 6 p.c year-over-year decline in infrastructure providers. ITO contract quantity, general, reached a report 376 offers.

ACV for enterprise course of outsourcing (BPO), in the meantime, leaped 43 p.c from the prior yr, to $1.four billion, however was down barely from the prior quarter. The BPO market was pushed by energy in industry-specific providers and engineering and R&D providers, whilst two of the most important BPO segments, services administration and phone heart providers, produced blended outcomes.

Americas

The Americas mixed market, at $8.6 billion of ACV, continued to develop, up 6 p.c from the prior yr and up 18 p.c from the fourth quarter. The as-a-service section rose 11 p.c versus the prior yr, and 10 p.c quarter over quarter, to a report $5.2 billion, fueled by robust demand for IaaS, up 14 p.c to a report $3.5 billion, together with 5 p.c development in SaaS, to $1.7 billion. The managed providers section, in the meantime, dipped 1 p.c from final yr, to $3.four billion, however was up 32 p.c from the fourth quarter, helped by 11 awards with ACV in extra of $40 million. ITO for the quarter, at $2.5 billion, was down Eight p.c from final yr, however up 51 p.c from the fourth quarter, whereas the BPO market rose 33 p.c from the prior yr, to $830 million.

Europe, Middle East and Africa (EMEA)

EMEA’s mixed market reached $6.zero billion, up 20 p.c from the prior yr, however down 5 p.c from its report fourth quarter. Both the as-a-service and managed providers segments produced robust outcomes. As-a-service rose 16 p.c over the prior yr, to a report $2.5 billion, on robust demand for IaaS, which produced report ACV of $1.Eight billion, up 19 p.c versus the prior yr, and on 9 p.c development in SaaS, to $658 million. Managed providers, in the meantime, generated $3.5 billion of ACV, up 23 p.c yr over yr, its second straight quarter of sizeable outcomes. ITO was up 17 p.c yr over yr, to $3.zero billion, on energy in each ADM and infrastructure providers. BPO surged 66 p.c, to $521 million, with robust demand for industry-specific, finance and accounting, and engineering and R&D providers.

Asia Pacific

Asia Pacific generated combined-market ACV of $2.6 billion, up 11 p.c yr over yr, however down 9 p.c from a report fourth quarter. Growth was propelled by the as-a-service section, which rose 22 p.c, to $2.2 billion, on energy in each IaaS (up 24 p.c, to $1.9 billion) and SaaS (up 12 p.c, to $292 million). Managed providers, in the meantime, slumped 25 p.c from the prior yr, to $390 million, as ITO slid 36 p.c, to $282 million, offsetting 29 p.c development in BPO, to $108 million.

2021 Forecast

ISG is forecasting the marketplace for cloud-based providers (IaaS and SaaS) will develop 18 p.c globally in 2021, down barely from its 20 p.c forecast in the beginning of the yr. ISG, in the meantime, has raised its development forecast for managed providers to five p.c, up from Three p.c in the beginning of the yr.

Commenting on ISG’s as-a-service forecast, Hall mentioned: “Many of the large IaaS providers are focusing on growing the top line and winning share, but ultimately they will have to generate profits. Building scale via long-term agreements with G2000 enterprises may provide that path to better margins. SaaS firms will need to focus on their land-and-expand strategies inside the client footprint, so they can upsell new products and build scale while also expanding internationally to tap new and underpenetrated geographies.”

On the managed providers facet, Hall mentioned ISG sees development by way of giant, transformation-focused offers this yr. “These multi-tower transactions encompass infrastructure, applications, and cloud migration and modernization. As the pandemic begins to ebb, we see decision-making ramping up with a greater willingness on the part of enterprises to sign large deals. Megadeals are a prerequisite for solid industry growth. Even four or five megadeals in the next couple of quarters should boost ACV growth by an additional 200 basis points, to 7 percent for the year.”

About the ISG Index™

The ISG Index™ is acknowledged because the authoritative supply for market intelligence on the worldwide know-how and enterprise providers {industry}. For 74 consecutive quarters, it has detailed the newest {industry} information and tendencies for monetary analysts, enterprise consumers, software program and repair suppliers, legislation companies, universities and the media. In 2016, the ISG Index was expanded to incorporate protection of the fast-growing as-a-service market, measuring the numerous impression cloud-based providers are having on digital enterprise transformation. ISG additionally supplies ongoing evaluation of automation and different digital applied sciences in its quarterly ISG Index shows.

The 1Q21 Global ISG Index was offered throughout a convention name and webcast right now. To hearken to an audio replay of the decision and think about presentation slides, visit this webpage.

For extra ISG Index insights, view these three infographics.

About ISG

ISG (Information Services Group) (Nasdaq: III) is a number one international know-how analysis and advisory agency. A trusted enterprise associate to greater than 700 purchasers, together with greater than 75 of the world’s prime 100 enterprises, ISG is dedicated to serving to companies, public sector organizations, and repair and know-how suppliers obtain operational excellence and quicker development. The agency makes a speciality of digital transformation providers, together with automation, cloud and information analytics; sourcing advisory; managed governance and danger providers; community service providers; technique and operations design; change administration; market intelligence and know-how analysis and evaluation. Founded in 2006, and primarily based in Stamford, Conn., ISG employs greater than 1,300 digital-ready professionals working in additional than 20 international locations—a worldwide staff identified for its progressive pondering, market affect, deep {industry} and know-how experience, and world-class analysis and analytical capabilities primarily based on the {industry}’s most complete market information. For extra data, go to www.isg-one.com.

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