ISG Index: APAC IT and business services market booming

By Kate Birch
Global tech research firm ISG Index says IT and business services market grew 44% to US$16.1bn in 2021 – fastest ever growth despite Q4 slowdown

According to the latest report from Information Services Group (ISG), Asia Pacific’s IT and business services market grew at its fastest pace ever in 2021, and could have been even higher as demand for cloud-based services slowed in Q4.

The Asia Pacific ISG Index, which measures commercial outsourcing contracts with annual contract value (ACV) of US$5 million or more, shows ACV – including both as-a-service (XaaS) and managed services – reached US$16.1bn, a rise of 44%.

XaaS spending rose 47%, to US$13.2bn. Breaking that down, growth for infrastructure-as-a-service grew 47.5% and software-as-a-service (SaaS) by 40% – both records.

Managed services rose 32%, IT outsourcing 26%, while business process outsourcing (BPO) climbed by 57.5%.

All the major markets in the region posted managed services gains in 2021, including Japan (up 49%), Australia-New Zealand (up 38%) and China (up 30%).

ISG’s report seems to have been backed up by results posted by leading technology companies.

Tata Consultancy Services (TCS) predicted continued growth, with chief executive Rajesh Gopinathan saying: “It’s a very broad-based growth that we are experiencing and very broad-based demand environment and we are participating strongly across the full spectrum of demand. That gives us quite a lot of confidence in terms of outlook for the future.”

Infosys has increased its forecast after a stong showing to predict 20% revenue growth for the financial year to March 2022, while Wipro reported December quarter revenue rose 30%, but profits remained flat.

Managed services fourth-quarter results showed slowdown

The overall picture for 2021 could have been even more positive for the region, as combined market ACV in the final quarter only rose 1% from the third quarter as spending in IaaS especially slowed. That said Q4 2021 was still 31% higher than the previous year.

“2021 was a stellar year for Asia Pacific, as enterprises across the region continued to embrace cloud computing as the backbone of digital transformation,” said Scott Bertsch, partner and regional leader, ISG Asia Pacific. 

“We also saw heightened demand for traditional managed services, with a record level of contracting and especially strong growth in application development and maintenance and networking services on the ITO side and facilities management and engineering/R&D services on the BPO side.”

Commenting on the region’s Q4 slow-down, Bertsch added: “The market slowing on a sequential basis was mainly confined to China and in the IaaS segment. Stripping out China, IaaS was up 68% year over year, and 18% quarter over quarter.”

Looking ahead to 2022, ISG forecasts the global market for cloud-based XaaS (IaaS and SaaS) will grow 20%, with the global market for managed services rising 5.1% – significantly higher than the historical average growth of 2% per year between 2010 and 2020.


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