Asia Pacific IT, Business Services Market Continues to Grow, But Slows From Q2 Levels, Q3 ISG Index

• 21 Oct 2024
• TM Team
• 0 Comments

The market for IT and business services in Asia Pacific continued to grow in the third quarter on solid demand for both managed and cloud-based services, although it decelerated from a strong Q2, according to the latest state-of-the-industry report from Information Services Group (ISG) , 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 third-quarter ACV for the combined market (both cloud-based XaaS and managed services) rose 10 percent versus the prior year, to US $4.6 billion, but was down 5 percent versus the second quarter.

Demand for managed services remained solid, with ACV up 17 percent over the prior year, to US $794 million, but down 43 percent from the second quarter. A total of 57 managed services contracts were awarded, up 36 percent year on year but down 30 percent quarter over quarter. New scope awards propelled the market, with volume up 47 percent and ACV up 18 percent versus the prior year.

Demand for cloud-based services grew 8 percent, to US $3.8 billion, and was up 10 percent sequentially from the second quarter. Although quarterly demand for XaaS has not exceeded the US $4 billion level since the second quarter of 2022, it was the third time in the last four quarters that ACV exceeded US $3.5 billion.

“After two consecutive quarters with managed services ACV of more than US $1 billion, Asia Pacific has settled back into a more typical US $800 million range,” said Michael Gale, partner and regional leader, ISG Asia Pacific. “Growth in the region has always been driven more by cloud services, given the market’s maturity and cloud-first mindset, and that segment is rebounding after a significant slump the last two years.”

Within managed services, IT outsourcing (ITO) ACV rose 18 percent, to US $622 million, driven by surging demand for application development and maintenance (ADM) services, up 238 percent in the quarter. Business process outsourcing (BPO), meanwhile, was up 12 percent, to US $173 million, led by strong growth in engineering, research and development (ER&D) services.

From a geographic perspective, demand for managed services was up by triple digits in China and Japan, and by double digits in South Korea. The region’s two largest markets, Australia/New Zealand (ANZ) and India, meanwhile, moved in opposite directions, with ANZ up 79 percent in the quarter and India down 61 percent, its weakest quarter since the first quarter of 2022.

By industry, banking, financial services and insurance (BFSI), energy and travel and transportation all moved to the upside, while manufacturing pulled back 19 percent for the quarter.

Within the XaaS segment, infrastructure-as-a-service (IaaS) ACV was up 8 percent, at US $3.3 billion, while software-as-a-service (SaaS) ACV rose 14 percent, to US $444 million.