Asia Pacific Tech Services Market Fuelled by Strong Demand for Managed and Cloud Services in Q4: ISG

• 22 Jan 2025
• TM Team
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Asia Pacific’s market for IT and business services was fueled in the fourth quarter by double-digit growth in cloud and managed services, driven in part by growing demand for AI, 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 fourth-quarter ACV for the combined market (both cloud-based XaaS and managed services) rose 23 percent versus the prior year, to US $5.5 billion. It was the fourth straight quarter Asia Pacific’s combined market rose year on year, with quarterly growth averaging more than 16 percent during that span. Compared with the third quarter, the market was up 20 percent sequentially.

Managed services ACV soared 33 percent, to US $1.1 billion, and was up 45 percent from the prior quarter. A total of 72 contracts were awarded in the fourth quarter, up 29 percent against the prior year. Within managed services, IT outsourcing (ITO) rose 25 percent, to US $825 million, on the strength of application development and maintenance (ADM) spending, while business process outsourcing (BPO) climbed 59 percent, to US $320 million, supported by growth in customer engagement and engineering, research and development services.

In the cloud space, XaaS ACV rose 20 percent, to US $4.3 billion, driven by 20 percent growth in infrastructure-as-a-service (IaaS), to US $3.8 billion, and 20 percent growth in software-as-a-service (SaaS), to US $527 million.

“Companies increasingly are turning to service providers, seeking specialized expertise and capabilities to accelerate their digital transformations,” said Michael Gale, partner and regional leader, ISG Asia Pacific. “The growth in managed services in 2024 has been extraordinary, with ACV exceeding US $1 billion in three of the four quarters last year. That’s never happened before.”

Gale pointed to rising interest in AI as a catalyst for continuing growth in cloud demand. “Enterprises are migrating more workloads to the cloud, not only for efficiency and cost savings, but to secure more data processing capacity to achieve their AI ambitions,” he said.