An email has been sent to your address with instructions for changing your password.
There is no user registered with this email.
Sign Up
To create a free account, please fill out the form below.
Thank you for signing up!
A confirmation email has been sent to your email address. Please check your email and follow the instructions in the message to complete the registration process. If you do not receive the email, please check your spam folder or contact us for assistance.
Welcome to our platform!
Oops!
Something went wrong while trying to create your new account. Please try again and if the problem persist, Email Us to receive support.
Americas Demand for IT, Business Services up Slightly in Q4, as Growth Slows Amid Economic Concerns, ISG Index™ Finds
Rhea-AI Impact
(Low)
Rhea-AI Sentiment
(Neutral)
Tags
Rhea-AI Summary
ISG's latest report indicates a mixed outlook for the IT and business services market in the Americas, with a slight increase in demand despite ongoing economic concerns. The fourth-quarter annual contract value (ACV) reached $12.3 billion, marking a 1% year-over-year increase but a 1% decline from Q3. The market shows signs of sequential decline for the third consecutive quarter due to reduced IaaS spending. XaaS solutions demonstrated a 1.4% growth, totaling $7.8 billion. For 2023, ISG forecasts 17% growth for XaaS and 5% for managed services, driven by cost optimization and digital transformation efforts.
Positive
Full-year ACV for the Americas combined market reached $50.7 billion, a 14.5% increase year-over-year.
Managed services ACV rose 5% to $18.7 billion, supported by record volume of 1,341 awards.
XaaS ACV climbed 21% to $31.9 billion, with IaaS up 29%, indicating a strong shift towards cloud services.
Negative
ACV for the combined market declined 1% sequentially from Q3, marking the first three consecutive quarters of decline.
IT Outsourcing (ITO) ACV decreased 9% to $3.0 billion, showing weakness in traditional service models.
Combined market up 1%, with IaaS and BPO growth offset by weakness in other segments
ISG forecasts 17% growth for XaaS and 5% growth for managed services globally in 2023
STAMFORD, Conn.--(BUSINESS WIRE)--
Demand for IT and business services in the Americas rose slightly in the fourth quarter but continues to be weighed down by economic concerns, the latest state-of-the-industry report from Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm, finds.
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 as-a-service (XaaS) and managed services—came in at $12.3 billion, up 1 percent from a year ago, but down 1 percent sequentially from the third quarter. The latest quarter is the third in a row the region saw a sequential decline in ACV—the first time this has happened, according to the ISG Index—driven by a sequential slowdown in infrastructure-as-a-service (IaaS) spending and essentially no growth in managed services.
“Demand in the Americas is slowing in response to current economic concerns, as U.S.-based enterprises scrutinize spending in the face of a potential economic slowdown,” said Todd Lavieri, vice chairman and president of ISG Americas and Asia Pacific. “Inflation and higher interest rates are the main culprits, as companies delay spending on non-critical projects.
“With that said, we see strong interest in cost optimization to fund ongoing digital transformation, which remains a business imperative as companies prepare for the next wave of digital innovation on the other side of this downturn,” Lavieri continued. “Clients are also challenging rapidly escalating cloud costs, looking for ways to avoid, optimize, or reduce those expenditures.”
Demand for cloud-based XaaS solutions was up 1.4 percent, to $7.8 billion, but was down 2 percent quarter over quarter, the second straight quarter this market has decelerated, which last occurred during the pandemic in 2020. Compared with last year, fourth-quarter ACV for IaaS was up 4 percent, to $5.3 billion, while software-as-a-service (SaaS) spending fell 3 percent, to $2.5 billion.
Managed services spending in the fourth quarter was $4.5 billion of ACV, up only 0.4 percent against a strong fourth quarter last year. Contract volume reached 325 deals in the quarter, up 7 percent over the prior year, the eight straight quarter with volume above 300 contracts. IT Outsourcing (ITO) ACV declined 9 percent, to $3.0 billion, while business processing outsourcing (BPO) ACV soared 25 percent, to $1.6 billion, on the strength of industry-specific services and facilities management.
Full-Year Results
For the full year, the Americas combined market generated $50.7 billion of ACV, up 14.5 percent over the prior year. Managed services ACV rose 5 percent, to $18.7 billion, on record volume of 1,341 awards, up 7.5 percent. Within managed services, ITO was down 7 percent, to $12.0 billion, while BPO was up 37 percent, to $6.8 billion.
ACV in the XaaS space climbed 21 percent, to $31.9 billion, with IaaS up 29 percent, to $22.1 billion, and SaaS up 7 percent, to $9.9 billion. XaaS now represents 63 percent of combined market ACV, up from 60 percent a year ago, reflecting the continuing move to cloud-based services.
2023 Global Forecast
ISG sees several potential positive developments for the market heading into 2023, including interest rate hikes coming to an end, inflation pressures lessening, China reopening, supply chains beginning to normalize, and the U.S. dollar coming off recent highs.
ISG analysts said XaaS providers are still dealing with “tech excess” and compensating for softening demand by reducing the size of their work forces after a period of significant hiring the last few years. Given this, ISG is forecasting annual ACV growth of 17 percent for the XaaS market in 2023, lower than in prior years.
As for managed services, the shift toward cost optimization “should provide favorable tailwinds for this market,” ISG analysts said. ISG is forecasting 5 percent ACV growth for managed services in 2023.
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 81 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. 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 800 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.
