Asia Pacific IT, Business Service Market Rebounds in Q1 from Weak Prior Quarter, ISG Index™ Finds
Asia Pacific's IT and business services showed mixed performance in Q1, with managed services increasing by 62% but XaaS declining by 23% year-over-year. The ISG Index™ reported a 4% sequential growth in ACV to $4.1 billion, though this is down 14% compared to last year. Managed services performed well with a 74% surge in IT outsourcing (to $643 million) and a 32% rise in business process outsourcing (to $182 million). In contrast, the XaaS market saw a total of $3.3 billion, which, despite sequential growth of 24%, reflects a significant year-over-year decline. ISG anticipates that the XaaS market will see demand improve in the second half of 2023, although Q1 results also indicated potential hurdles due to macroeconomic factors.
- Managed services ACV rose 62% year-over-year, indicating strong demand.
- IT outsourcing surged 74%, reaching $643 million in ACV.
- Business process outsourcing grew 32%, totaling $182 million.
- 57 managed services contracts awarded, up 21% year-over-year.
- XaaS down 23% year-over-year, indicating a significant market decline.
- Overall ACV dropped 14% compared to the prior year.
- Infrastructure-as-a-service declined 24% year-over-year.
- XaaS market forecast for 2023 lowered to 15% growth.
Region sees mixed results in Q1 with managed services up
The Asia Pacific ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of US
“Asia Pacific had quite a run in 2021 and 2022, with six straight quarters of ACV over US
The cloud-based XaaS market grew 24 percent sequentially versus the fourth quarter, to US
In the XaaS space, infrastructure-as-a-service declined 24 percent versus the prior year, to US
“The last three quarters have seen year-over-year declines in cloud services ACV, with the last two dropping more 20 percent, putting us in the middle of the biggest sustained decline the XaaS segment has ever experienced in this region,” Bertsch said. “The market appears to have bottomed out in Q4, so we expect to see positive comps return soon.”
Bertsch said softening cloud demand in
Within managed services, IT outsourcing in the first quarter soared 74 percent, to US
During the first quarter, 57 managed services contracts were awarded, up 21 percent versus the prior year, but down sharply off the record 97 awards made in the fourth quarter last year.
Geographic Performance
2023 Global Forecast
ISG lowered its forecast for global XaaS growth in 2023 to 15 percent, down 200 basis points from its January forecast, and maintained its global growth forecast for managed services at 5 percent.
“Globally, the macro environment remains uncertain, with interest rates, inflation and trouble in the banking sector topping concerns for enterprise clients,” said Bertsch. “There continues to be more scrutiny on deal signings, especially in discretionary spending areas. Enterprises are revisiting cost optimization, efficiency gains and vendor consolidation deals.”
ISG said industry attrition has stabilized and the firm expects hiring to improve in the back half of the year. The decline in global XaaS bookings is expected to last through the second quarter, with demand picking up again in the second half, ISG said.
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 82 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.
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