Asia Pacific IT, Business Services Market Down Sharply in Q2, ISG Index™ Finds
July 21 2022 - 7:00PM
Business Wire
Combined market, XaaS and managed services
all down versus strong year-ago quarter
Asia Pacific’s IT and business services market was down sharply
in the second quarter, buffeted by slowing demand in several key
geographies, 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 second-quarter ACV at US $3.0 billion
for the combined market—including both cloud-based XaaS and managed
services. That was down 33 percent versus last year’s second
quarter and 31 percent sequentially from the first quarter, both
strong periods. It was also the sharpest quarterly decline in the
region’s combined market ever recorded by the ISG Index, and the
third quarter in the past four in which growth slowed
sequentially.
“Asia Pacific has been on a tremendous run, topping US $4
billion for four straight quarters dating back to last year,” said
Scott Bertsch, partner and regional leader, ISG Asia Pacific. “We
have seen a gradual slowing of the market in recent quarters,
although demand continues to remain high. Economic headwinds
dramatically slowed the market in the second quarter, particularly
in ANZ, Japan and China, which all faced difficult comparisons with
prior periods.”
ACV for cloud-based XaaS, a long-time growth engine for the
region, slumped 38 percent year over year and 44 percent against
the first quarter, to US $2.2 billion. It was the lowest quarterly
XaaS ACV for the region since the pandemic-impacted third quarter
of 2020. The slowdown reflects weakness in China, impacted by
extended Covid lockdowns and a tighter regulatory environment for
the country’s technology sector. China’s big hyperscalers –
including Baidu, Alibaba and Tencent – saw their growth stall.
Within the XaaS segment, infrastructure-as-a-service (IaaS) was
down 43 percent from a year ago, to US $1.8 billion, even as
software-as-a-service (SaaS) advanced 16 percent year on year, to
US $378 million. The latter reflects the continuing trend away from
traditional, on-premises software licensing, as well as growing
uptake on SAP S/4 HANA and Microsoft Dynamics.
On the managed services side, ACV declined 17 percent year on
year, to US $826 million, but was up 63 percent against the first
quarter. Demand for managed services has exceeded US $800 million
in three of the last five quarters, a sustained level of
performance above historical norms. India and Southeast Asia were
up markedly in the quarter, while Australia-New Zealand, Japan and
China saw declines against strong prior-year periods.
There were 76 managed services contracts signed during the
second quarter, the most ever recorded for the region, beating the
previous high of 72 contracts in the second quarter of 2017.
First-Half Results
First-half ACV for the combined market, at US $7.4 billion, was
down 5.5 percent versus the same period last year, the first time
ACV declined in a first half since 2016. ACV for XaaS was US $6.1
billion, down 6 percent, the first time the region’s XaaS market
has been down at the half-year mark. Managed services ACV, at
US $1.3 billion, was down 4 percent versus the prior-year
period. There were 123 managed services contracts signed in the
first half, up 27 percent over the like period in 2021, and the
highest volume Asia Pacific has ever recorded in the first
half.
2022 Global Forecast
With the potential for continued economic uncertainty, ISG
lowered its 2022 global growth forecast for cloud-based XaaS (IaaS
and SaaS) to 18 percent, from 22 percent a quarter ago, and reduced
its global growth forecast for managed services to 3.5 percent,
from 5.1 percent in the first 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 79 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20220721006069/en/
Press: 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
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