Asia Pacific Sourcing Hits New Record in Q4: ISG Index

The Asia Pacific technology and business services market reached a record high in the fourth quarter, rebounding sharply from a pandemic-induced downturn in Q3, according to the latest state-of-the-industry report from Information Services Group (ISG) (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 the region generated a record US $2.6 billion in combined-market ACV in the fourth quarter, up 35 percent over the prior year. All market segments were up by double digits.

 

Cloud-based services (as-a-service) rose 30 percent, to US $1.9 billion, a new quarterly record. Within the segment, infrastructure-as-a-service (IaaS) climbed 33 percent, to a record US $1.7 billion, while software-as-a-service (SaaS) advanced 12 percent, to US $257 million.

 

Managed services, against a soft quarter a year ago, soared 55 percent, to US $641 million, with IT outsourcing (ITO) up 76 percent, to US $473 million, and business process outsourcing (BPO) up 16 percent, to US $168 million. The strong fourth quarter came after the managed services market in Asia Pacific fell in the third quarter to its lowest level in 14 years, as buyers retreated amid pandemic concerns. Quarter-over-quarter, managed services was up 90 percent.

 

For all of 2020, Asia Pacific’s combined market produced a record US $9.0 billion of ACV, up 2 percent, boosted by a record US $6.9 billion of as-a-service ACV, up 16 percent over the prior year. Managed services, however, slumped 27 percent, to US $2.0 billion.

 

“Managed services finished the year on a high note, with Australia/New Zealand and the BFSI sector turning in their best quarterly performance in two years,” said Scott Bertsch, partner and regional leader, ISG Asia Pacific. “The strong finish, however, belies the overall weakness in 2020 brought on by the pandemic. For the first time since 2001, the region did not have any mega-deals.”

 

ISG defines a mega-deal as a contract with more than US $100 million in ACV.

 

Bertsch pointed out that the Asia Pacific market continues to be dominated by the as-a-service sector, which accounted for 77 percent of the region’s combined results for the year, far and away the highest share for cloud-based services of any region.

 

Although SaaS ACV dipped slightly for the full year, IaaS surged 19 percent, as public cloud providers extended their reach and increased share. AWS, for one, announced plans to open a second infrastructure cloud region in India, and attracted customers including RBL Bank, Axis Bank and Mahindra Electric Mobility.

 

Within managed services, full-year ITO took a 26 percent dive from the prior year, hitting a low not seen since 2016. Both Infrastructure and application development and maintenance (ADM) services saw double-digit declines due to a lack of large deals.

 

Bright spots in ADM were the nine-year contract Hindustan Aeronautics signed with Tech Mahindra for ERP implementation, and TCS’s work to modernize the application estate of AGL Energy in Australia. Among notable infrastructure deals, Singapore’s DBS Bank signed a seven-year contract with IBM to simplify its IT infrastructure, and Japan’s Rakuten Mobile inked an agreement with Tech Mahindra for managed IT, security and network services.

 

Global Forecast

 

ISG is forecasting the market for cloud-based services will grow 20 percent globally in 2021, and the market for managed services will grow 3 percent.

 

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 73 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, 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 700 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.

 

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ISG Index: Managed Services Hits 14-Year Low in Asia Pacific

ITO, BPO markets slump on COVID -19 concerns, as companies turn to cloud-based services

SYDNEY, Australia, Oct. 28, 2020 (GLOBE NEWSWIRE) -- Buffeted by pandemic concerns, the managed services market in Asia Pacific fell in the third quarter to its lowest level in 14 years, according to the latest state-of-the-industry report from Information Services Group (ISG ) (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 the region's managed services market plummeted 48 percent in the third quarter, to US $338 million, its worst showing since 2006. Within managed services, information technology outsourcing (ITO) was down 50 percent, to US $277 million, and business process outsourcing (BPO) was down 32 percent, to US $61 million.

Meanwhile, ACV for cloud-based services, traditionally the dominant force in the region's sourcing success, was up 6 percent in the third quarter, to US $1.6 billion. That figure includes infrastructure-as-a-service (IaaS), up 8 percent, to US $1.4 billion, and software-as-a-service (SaaS), down 8 percent, to US $222 million—one of its lightest quarters in the last three years.

Asia Pacific's combined market (both managed services and as-a-service) was down 10 percent, to US $1.97 billion, despite overall growth in the as-a-service segment.

"Asia Pacific began the year with a record quarter for cloud-based services, but the as-a-service market has drifted lower the last two quarters, reflecting slowing investment due to the pandemic," said Scott Bertsch, partner and regional leader, ISG Asia Pacific. "This quarter, the growth in cloud-based services was not enough to lift the combined market in Asia Pacific."

Market-share battles in cloud infrastructure continue to rage across the region, especially in India, where the action is heating up in the telco, broadband internet and public cloud markets, Bertsch said. AWS, for example, signed an agreement with Bharti Airtel to bring more cloud services to companies in India, while Microsoft formed a partnership with Jio.

In the managed services arena, Bertsch noted that contract volume fell back to more typical levels in the third quarter after a rise in contracting activity the previous quarter. "Virtually all the deals were below US $20 million," said Bertsch. "Large awards, historically a challenge for Asia Pacific, have dried up since the onset of COVID-19, and the path to closing those deals has grown longer."

Notable bright spots, Bertsch said, were Accenture winning a sizable transaction with a large manufacturer in Asia, and IBM closing a deal with the Airport Authority of Hong Kong.

Year-to-Date Performance

For the first nine months, Asia Pacific's combined market dropped 7 percent, to US $6.4 billion. Managed services dropped 41 percent, to US $1.4 billion, on a lack of large deals, with ITO (down 40 percent, to US $1.2 billion) and BPO (down 49 percent, to US $197 million) both contributing to the poor performance. Most of the region's geographic markets were down substantially, except for Australia-New Zealand (ANZ), which saw its ACV grow 3 percent year to date.

As-a-Service, meanwhile, rose 11 percent, to US $5 billion, although this segment is growing much more slowly than in previous years. IaaS was up 14 percent, to US $4.3 billion, even as SaaS declined 6 percent, to US $695 million.

Global F orecast

ISG is forecasting the global managed services market will be down 6 percent for the full year, 150 basis points better than its July forecast. The firm is projecting the global as-a-service market will grow by 15.5 percent in 2020, up from its 11 percent forecast in July.

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 72 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, 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 700 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 .