STOCK TITAN
The best stock market news and trading tools all in one place—your must-have platform for investing success.
A must-have platform for stock market information, offering the best tools and updates to supercharge your trading.
Your trusted source for the best stock market news, trading tools, and expert advice. Everything traders need, in one place.

Asia Pacific’s Spending on Cloud Services Down Sharply in Q3, ISG Index™ Finds

Rhea-AI Impact
(Low)
Rhea-AI Sentiment
(Neutral)
Tags
Rhea-AI Summary

Spending on cloud services in Asia Pacific decreased significantly in Q3 due to economic concerns and ongoing disruptions in China. The latest ISG Index™ reported a 29% drop in annual contract value (ACV), totaling $3.1 billion. XaaS ACV fell 37% year-on-year to $2.4 billion, with IaaS down 40% and SaaS 15%. Managed services, however, saw a 17% increase in ACV to $745 million. The overall ACV for YTD was $10.6 billion, marking a 14% decline. Economic uncertainty is expected to impact future growth forecasts.

Positive
  • Managed services ACV increased 17% to $745 million.
  • IT outsourcing (ITO) rose 23% to $545 million, driven by demand for application development.
  • Despite challenges, managed services contracts signed reached 177, the highest volume ever.
Negative
  • Total ACV for cloud services dropped 29% to $3.1 billion, the steepest decline since 2015.
  • XaaS ACV decreased 37% year-on-year to $2.4 billion.
  • IaaS fell 40% year-on-year to $2.0 billion, attributed to lower demand from China.
  • XaaS growth forecast lowered from 18% to 10.5% amid economic uncertainties.

Managed services growth not enough to offset pullback in XaaS spending

SYDNEY--(BUSINESS WIRE)-- Spending on cloud services in Asia Pacific was down sharply in the third quarter, as the market was weighed down by economic concerns and continuing business disruptions in China, the latest state-of-the-industry report from Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm, finds.

The Asia Pacific ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of US $5 million or more, shows third-quarter ACV for the combined market (managed services and cloud-based XaaS) dropped 29 percent, to US $3.1 billion. Although the combined market rose 3 percent sequentially from a weak second quarter, it was down sharply from its peak of US $5 billion in the fourth quarter of 2021.

Cloud-based XaaS continues to dominate this market, accounting for 80 percent of combined market ACV year to date. But that was down from an 83 percent share last year, as spending on cloud services has rapidly decelerated the last two quarters.

In the third quarter, XaaS ACV slumped 37 percent versus the prior year, to US $2.4 billion, but was up 9 percent against a weak second quarter. Within this segment, infrastructure as-a-service (IaaS) fell 40 percent versus the prior year, to US $2.0 billion, while software-as-a-service (SaaS) fared a bit better, down 15 percent, to US $390 million.

“Much of the slump in IaaS can be attributed to lower demand for cloud services provided by China’s big four hyperscalers,” said Scott Bertch, partner and regional leader, ISG Asia Pacific. “The country’s crackdown on tech companies, combined with its zero-Covid policy, makes it difficult for enterprises to do business with China’s hyperscalers. In general, enterprises are slowing their spending on cloud services in response to weak economic conditions.”

On the managed services side, ACV advanced 17 percent year on year, to US $745 million. Spending on IT outsourcing (ITO) rose 23 percent, to US $545 million, while business process outsourcing (BPO) rose 1 percent, to US $199 million. The ITO market was buoyed by strong demand for application development and maintenance services, while the BPO market saw strong demand for contact center services.

There were 53 managed services contracts signed during the third quarter, down 12 percent.

From a geographic standpoint, the India and Southeast Asia markets were up substantially from last year, while enterprises pulled back on spending in Japan and China. The region’s largest geographic market by ACV, Australia-New Zealand (ANZ), posted a second straight quarter with ACV greater than US $250 million. Spending in ANZ was up 4 percent versus the prior year.

Year-to-Date Results

For the first nine months of 2022, Asia Pacific’s combined market generated ACV of US $10.6 billion, down 14 percent versus the same period last year, the steepest decline since ISG began measuring the combined market in 2015. XaaS ACV declined 17 percent, to US $8.6 billion, while managed services rose 2 percent, to US $2.1 billion. Enterprises signed 177 managed services contracts in the period, the highest volume ever.

2022 Global Forecast

ISG sees economic uncertainty caused by rising interest rates, energy shortages, supply chain disruptions and continuing inflation dampening enterprise demand in the near term. The firm maintained its growth forecast for managed services at 3.5 percent for the year, and lowered its forecast for XaaS to 10.5 percent, down from 18 percent in the prior quarter.

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 80 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 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.

Press Contacts:



Will Thoretz, ISG

+1 203 517 3119

will.thoretz@isg-one.com



Julianna Sheridan, Matter Communications for ISG

+1 978-518-4520

isg@matternow.com

Source: Information Services Group, Inc.

FAQ

What was the decline in Asia Pacific's cloud services spending in Q3 2022 for III?

Cloud services spending in Asia Pacific dropped 29% in Q3 2022.

What were the key figures for XaaS ACV reported for III in Q3 2022?

XaaS ACV slumped 37% year-on-year to $2.4 billion in Q3 2022.

How did managed services perform in Q3 2022 for III?

Managed services ACV increased by 17% to $745 million in Q3 2022.

What is the year-to-date ACV for Asia Pacific reported by III?

YTD ACV for Asia Pacific was $10.6 billion, a 14% decline compared to the previous year.

What is the updated growth forecast for XaaS by ISG for 2022?

The growth forecast for XaaS has been lowered to 10.5% from 18%.

Information Services Group, Inc.

NASDAQ:III

III Rankings

III Latest News

III Stock Data

179.85M
35.05M
28.57%
60.91%
0.26%
Information Technology Services
Services-management Consulting Services
Link
United States of America
STAMFORD