Asia Pacific sees double-digit growth in sourcing market
The technology and business services market in the Asia Pacific region achieved a record high in the fourth quarter of 2020, according to the latest state-of-the-industry report from
Information Services Group (ISG), a leading global technology re search and advisory firm.
The region generated a record US$2.6 billion in combined-market ACV in the last quarter of 2020, up 35% over the prior year, with all market segments up by double digits, and managed services witnessing a 90% growth quarter-over-quarter.
Region setting sourcing sights for growth
This recent report shows the Asia Pacific market for technology and business services appears to be shrugging off the worst effects of the pandemic and is turning its sights to post-pandemic recovery and growth.
Such a strong fourth quarter followed a difficult previous three quarters of 2020 with the managed services market in Asia Pacific falling in the third quarter to its lowest level in 14 years, as buyers held back over pandemic uncertainty.
According to Scott Bertsch, partner and regional leader, ISG Asia Pacific, the strong finish in 2020 “belies the overall weakness in 2020 brought on by the pandemic” as for the first time since 2001 “the region did not have any mega-deals”.
Despite this, for all of 2020, Asia Pacific produced a record US$9 billion of ACV, up 2%, across the combined market of technology and business services, with the success of the as-a-service segment boosting the overall figures.
Cloud-based services demand skyrockets
While some market areas took a dip, both in Q4 and throughout 2020, the as-a-service market showed great growth, witnessing a record US$6.9 billion ACV for 2020, up 16% from 2019, with cloud-based services in particular surging.
While Cloud-based services (as-a-service) were up 30%, to US$1.9 billion, in the fourth quarter, infrastructure-as-a-service (IaaS) climbed 33%, to a record US$1.7 billion, and software-as-a-service (SaaS) advanced 12% to US$257 million.
This means that while SaaS ACV dipped slightly during the entire year of 2020, IaaS surged 19% as public cloud providers extended their reach and increased share. AWS, for example, has announced plans to open a second infrastructure cloud region in India, and attracted customers including RBL Bank, Axis Bank and Mahindra Electric Mobility.
Bertsch points out that the Asia Pacific market continues to be dominated by the as-a-service sector, which accounted for 77% of the region’s combined results for 2020, the highest share for cloud-based services of any region.
Managed services soar in Q4 after slump of 2020
Managed services, against a soft quarter a year ago, did end the year on a high note, soaring 55% to US$641 million in the fourth quarter of 2020, with IT outsourcing (ITO) up 76% and business process outsourcing (BPO) up 16%. In fact, Australia and New Zealand and the BFSI sector turning in their best quarterly performance in two years,” states Bertsch.
However, in 2020, the sector took a 26% dive, to US%2 billion, hitting a low not seen since 2016, with infrastructure and application development and maintenance (ADM) services witnessing double-digit declines due to a lack of large deals.
Among notable infrastructure deals of 2020, Singapore’s DBS Bank signed a seven-year outsourcing 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.
Q&A: Professor Loredana Padurean, Asia School of Business
As someone who is creating Asia Pacific’s business leaders of the future, what do you believe are the essential skills leaders require?
In many ways, we need leaders who are Renaissance women/men or polymaths, as opposed to specialists of an industry or a field. A polymath is a person with profound knowledge, proficiency and expertise in multiple fields and today’s leaders have to be able to combine various ideas, look at problems in novel and useful ways, and develop a broad and yet still deep set of skills, talents, and knowledge.
You’ve coined ‘smart’ and ‘sharp’ as skills of the future. What are these?
They are replacements for ‘soft’ and ‘hard’ skills, a concept coined by a US Army doctor in 1972 who observed that his pupils had different skills: dealing with machinery required ‘hard’ skills, while dealing with people and paper were ‘soft’ skills. This concept has served us well since, but I find it too binary, not to mention the semantic implications of the words themselves.
Soft implies gentle, delicate, mild, quiet, tender, weak. However, there is nothing soft in navigating competing perspectives and cultures, handling and delivering critical feedback or dealing with office politics. Instead, I prefer to call these skills ‘smart’. Hard implies rigid, difficult, heavy, static. But how can we think of engineering or software development as static or rigid? I believe ‘sharp’ is more apt as such skills need constant updating or sharpening.
I think it’s time to reflect on these classifications, because we can drastically change someone’s perspective by how we choose to talk about and frame something.
How important are smart skills in leadership today?
Smart skills are more important than ever because we live in a world of extreme diversity: generational, ethical, value-based, gender, etc. Gone are the days when giving an order was an effective act of leadership. I personally work with people from five different continents and across five different generations, therefore as leaders, we need to know how to adapt, motivate, inspire and connect. We need to increase our investment in learning about them in action, especially as smart skills are more difficult to develop.
I believe that a successful leader today has to be both smart and sharp. Take cognitive readiness, one of my top 10 smart skills. In order to be cognitive ready, one has to master system dynamics, one of my top 10 sharp skills. Also, did you know that one of the primary reasons why digital transformation fails is not the absence of digital literacy, a sharp skill, but the need for more validation and adaptability, both smart skills. So, instead of thinking of these skills as binary, I prefer to think of them as the yin and yang; co-existing and complementing each other.
So, you can teach leaders smart skills then?
Yes, you can, via a combination of the classroom experience, plus an action component supported by deeply embedded reflection. At ASB we call this Action Learning, and we teach it both in the MBA and in the executive programs. For example, in teaching a leader emotional maturity as a smart skill, first they need to learn what it is, and then act on it, before reflecting on what we did and how we did it. And then to repeat it, but this time with more expertise and awareness. It’s not easy, but that’s why my favourite mantra is ‘the job is easy, the people are not’.
Discover Professor Padurean's successful skills for a digital transformation here