Sign In  |  Register  |  About Los Altos  |  Contact Us

Los Altos, CA
September 01, 2020 1:26pm
7-Day Forecast | Traffic
  • Search Hotels in Los Altos

  • CHECK-IN:
  • CHECK-OUT:
  • ROOMS:

Americas Market for IT and Business Services Down Sharply in Q2, ISG Index™ Shows

Caution over an uncertain economy, weakness in BFSI impacted demand for outsourcing

Demand for IT and business services in the Americas fell sharply in the second quarter, reflecting softness in the banking, financial services and insurance (BFSI) sector and slackening demand for cloud-based services overall, 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 Americas ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, shows first-quarter ACV for the combined market—including both cloud-based (XaaS) and managed services—was down 13 percent, to $10.9 billion, the steepest year-over-year drop for the region since ISG began tracking the combined market in 2015. The Americas market has been decelerating since peaking in the first quarter of 2022, and for the second quarter fell below $11 billion for the first time in two years.

“Enterprise IT spending was down from recent highs, as concern over an uncertain economy persisted last quarter,” said Todd Lavieri, ISG vice chairman and president of ISG Americas and Asia Pacific. “We’re seeing more contract restructuring as enterprises press for cost optimization. Spending on discretionary cloud projects was down, reflecting a global trend. Not surprisingly, discretionary spending in Banking, Financial Services and Insurance (BFSI) was down in reaction to market turmoil earlier this year. The impact was noticeable, as the BFSI industries together represent the largest market for IT spending.

“With signs of slowing inflation in the U.S., along with banking concerns abating, we expect the Americas market to slowly rebound over the next few quarters,” Lavieri said.

Managed services ACV for the second quarter declined 6.5 percent, to $4.4 billion. A total of 358 managed services contracts were awarded during the quarter, up 9.5 percent, the second-best quarter ever for deal activity. Among the awards were three mega-deals (those with ACV of more than $100 million). Restructuring ACV was up 28 percent, while the annual value of new-scope awards was down 20 percent.

Within managed services, IT outsourcing (ITO) climbed 18.5 percent, to $3.5 billion of ACV, fueled by strong demand for application development and maintenance (ADM) and data center services, while business process outsourcing (BPO), at $941 million, was down 47 percent from the prior year, with most areas down, except for contact center and facilities management services.

Second-quarter demand for XaaS solutions was down 17 percent, to $6.5 billion, its sharpest quarterly drop ever. The market has declined sequentially for five straight quarters, and the rate of decline is accelerating, as clients focus on optimizing their existing cloud environments rather than add new workloads. Infrastructure-as-a-service (IaaS) declined 21 percent, to $4.1 billion, while software-as-a-service dropped 9 percent, to $2.4 billion.

First-Half Results

The Americas’ combined market was down 10 percent year to date, to $23.1 billion, the first time the region has had a down first half.

Managed services ACV declined 3.5 percent, to $9.7 billion, on 714 contracts – including nine mega-deals, the most awarded during the period since 2010. Within managed services, ITO rose 10 percent, to $6.7 billion, while BPO fell 24 percent, to $3.0 billion.

XaaS spending in the first half was down 14 percent, to US $13.5 billion, as IaaS slumped 18 percent, to $8.5 billion, and SaaS declined 7 percent, to $4.9 billion.

2023 Global Forecast

ISG lowered its global forecast for XaaS revenue growth in 2023 to 11.5 percent, down 350 basis points from its March forecast, and maintained its growth forecast for managed services at 5 percent.

“In building our forecast, we considered macro uncertainties that have delayed decision-making and tightened discretionary spending,” said Lavieri. “We also noted that interest rates have risen more in the past year than in the previous 30, which has dampened big infrastructure investments. But the difficult comps will soon be behind us, and excitement is growing around generative AI. That could provide a tailwind for cloud and ADM services.”

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 83 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 900 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 1,600 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.

Contacts

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.
 
 
Copyright © 2010-2020 LosAltos.com & California Media Partners, LLC. All rights reserved.