The overall market was down 3%, driven by an 8% decline in managed services. XaaS 1% increase
BFSI accounts for over 70% of managed services decline
Stamford, CT, April 16, 2024–(BUSINESS WIRE)–The latest developments show that the IT and business services market in the Americas weakened in the first quarter due to economic uncertainty, compared to the same period last year in the region. The decline in the ratio widened for the fifth consecutive quarter. Industry report from Information Services Group (ISG) (Nasdaq: III), the world's leading technology research and advisory firm.
The Americas ISG Index™ measures commercial outsourcing contracts with an annual contract value (ACV) of $5 million or more and ranks #1 in the combined market, including both managed services and cloud-based as-a-service (XaaS). Shows quarterly ACV. —$12.1 billion, down 3% year over year. The rate of decline in the first quarter slowed compared to the average decline of 5.4% over the previous five quarters. Compared to the fourth quarter of 2023, the overall market grew by 2%.
“The Americas continues to be affected by economic and geopolitical concerns, and the region's market downturn that began in early 2022 has contributed to the region's market downturn that began in early 2022,” said Todd Lavieri, ISG Vice Chairman and President, Americas and Asia Pacific. It's been going on for a long time,” he said. “The widespread expansion of generative AI in fall 2023 also put a damper on large-scale investments as clients worked to balance potential strategic opportunities with current needs. In the midst of this, businesses are still focused on optimizing their existing investments across the board.'' Their IT portfolios have been delayed and spending on those projects increased in the first quarter. got it. ”
Ravieri said ISG expects the IT and business services market to improve in 2024, adding: “We are cautiously optimistic that businesses will increase spending on IT and business services in the second half of this year. “Investment in cloud computing is starting to increase again, partly due to the rise.” There is a lot of interest in generative AI and the data needed to train the large-scale language models that support this powerful new technology. ”
First quarter performance by segment
Managed Services' first quarter ACV was $5.1 billion, down 8% year-over-year and down 7% sequentially. The number of contracts increased by 2% to 367, the third-highest number for the quarter in the Americas. Two megadeals (contracts with an ACV of $100 million or more) were awarded in the quarter, the lowest number since Q3 2022.
The ACV of new business (down 9%) and restructured business (down 5%) both declined in the quarter, but the number of small business (ACV of $30 million or less) increased 2.5%, compared to other regions. This reversed the downward trend. .
By industry, the banking, financial services, and insurance (BFSI) sector saw an 18% decline in ACV, accounting for more than 70% of the overall managed services ACV decline in the quarter. Other large industries also performed well, with ACVs in healthcare/pharmaceuticals and manufacturing both rising more than 2% in the quarter. Other industries such as Energy, Travel, Transportation and Leisure showed double-digit increases in ACV despite having a smaller base.
Within managed services, IT outsourcing (ITO) ACV increased 1% to $3.4 billion. This was driven by strong growth in bundled infrastructure and application development and maintenance (ADM) services, offset by sharp declines in areas such as data center and end-user computing services. . Meanwhile, business processing outsourcing (BPO) ACV fell 22% to $1.7 billion. Significant declines in contact center and industry-specific services were partially offset by growth in financial accounting (FAO), engineering and supply chain services.
XaaS ACV increased 1% to $7.1 billion, breaking four consecutive quarters of year-over-year declines and reaching the highest total ACV since the fourth quarter of 2022. It was also his second consecutive quarter in this segment. We will gradually improve the results.
Within this segment, Infrastructure as a Service (IaaS) ACV increased 2% year over year to $4.6 billion, while Software as a Service (SaaS) was flat at $2.5 billion.
World predictions for 2024
ISG expects managed services growth to be 3%, down 125 basis points from its January forecast, and maintains its forecast for XaaS revenue growth of 15% in 2024.
“Looking ahead to the remainder of this year, we expect the economic situation to be less volatile than in 2023, but challenges remain,” Lavieli said. “Customers remain focused on quality of service, innovative customer experiences, IT security and costs. Global competitiveness remains a challenge, especially in an environment where interest rates remain elevated from last cycle. Masu.”
“Outsourcing is likely to increase as enterprises seek to balance cost control and quality of service. Meanwhile, GenAI is poised to be a growth catalyst, and leading hyperscalers are looking to support increasing workloads. The data layer that is expected to be essential for training AI models is a great opportunity for service providers.”
About ISG Index™
The ISG Index™ is recognized as the authoritative source of market information for the global technology and business services industry. For 86 consecutive quarters, we have detailed the latest industry data and trends for financial analysts, enterprise buyers, software and service providers, law firms, universities, and the media.
Q1 2023 Global ISG Index results were announced in a webcast on April 11th. To view a replay of the webcast and download presentation slides, 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 companies, ISG is committed to helping businesses, public sector organizations, and service and technology providers achieve operational excellence and faster growth. We are committed to The company specializes in digital transformation services including AI and automation, cloud and data analytics. Procurement recommendations. Managed governance and risk services. Network carrier service. Strategic and operational design. Change management; market intelligence and technology research and analysis. Founded in 2006 and headquartered in Stamford, Conn., ISG employs more than 1,600 digitally enabled professionals operating in more than 20 countries. This global team is known for innovative thinking, market impact, deep industry and technology expertise, and world class. Research and analysis capabilities powered by the industry's most comprehensive market data. For more information, please visit www.isg-one.com.
View source version on businesswire.com. https://www.businesswire.com/news/home/20240416206792/ja/
contact address
Press contact:
Will Tretz, ISG
+1 203 517 3119
will.thoretz@isg-one.com
Juliana Sheridan, ISG Matter Communications
+1 978-518-4520
isg@matternow.com
