As-a-service ACV reaches record $5.2 billion; managed services produces mixed results
Americas demand for cloud-based services reached a record high during the first quarter even as the market for traditional managed services produced mixed results, according to the latest state-of-the-industry report from Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.
The Americas ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, shows the region delivered a record $5.2 billion of cloud-based as-a-service ACV in the first quarter, up 11 percent from the prior year and 10 percent over the fourth quarter. Growth was fueled by strong demand for infrastructure-as-a-service (IaaS), which rose 14 percent versus the prior year, to a new high of $3.5 billion, along with 5 percent growth in software-as-a-service (SaaS), to $1.7 billion.
"Enterprise demand for cloud-based services continues to rise," said Todd Lavieri, vice chairman of ISG and president of ISG Americas and Asia Pacific. "If anything, the pandemic has served as a catalyst for growth. Over the last year, companies have accelerated their cloud adoption to enable remote working and improve digital customer experience, while also seeking efficiency and cost savings so they can reinvest in other areas, such as cybersecurity, that are critical to their overall digital journey. This year, we see digital transformation picking up even more steam as global economies begin to rebound."
The managed services segment, meanwhile, dipped 1 percent from last year, to $3.4 billion, but was up 32 percent from the fourth quarter, helped by 11 awards with ACV in excess of $40 million. IT outsourcing (ITO), at $2.5 billion, was down 8 percent from last year, but soared 51 percent from the fourth quarter, while business process outsourcing (BPO) rose 33 percent from the prior year, to $830 million.
At $8.6 billion of ACV, the Americas combined market (as-a-service and managed services) was up 6 percent from the prior year and up 18 percent from the fourth quarter.
A number of significant deals were reported during the first quarter. Within the IaaS space, the public cloud hyperscalers battled for market share in the automotive sector, as Ford inked a six-year deal with Google Cloud Platform to support in-vehicle connectivity, while Microsoft invested in Cruise, GM’s driverless car startup, which will use Microsoft’s Azure cloud.
On the SaaS side, key deals included ServiceNow’s multiyear, multi-product contract with AT&T, along with other signings at BP, USAA and Booking.com. Adobe, meanwhile, had notable customer wins for its Experience Platform, including at Abbott Labs, Coca-Cola, FedEx and Mondelez.
Among notable ITO deals, Kaiser Permanente signed a multiyear ADM deal with Accenture to re-platform digital assets on Azure, and Infosys inked a five-year deal with Newmont Mining to leverage AI. On the infrastructure side, DXC won a sizable deal with Molson Coors across multiple layers of the enterprise technology stack.
The BPO market was fueled by industry-specific services and engineering and R&D services. Infosys signed a $500 million deal with Google to provide customer experience and engineering support. Contact Center services, a distressed sector last year, began to rebound, as evidenced by TTEC’s agreement with Schwan’s Home Delivery to quickly deliver a virtual customer engagement center.
2021 Global Forecast
ISG is forecasting the global market for cloud-based services (IaaS and SaaS) will grow 18 percent in 2021, down slightly from its 20 percent forecast at the start of the year. ISG, meanwhile, has raised its growth forecast for managed services to 5 percent, up from 3 percent at the start of the year.
About the ISG Index™
The ISG Index™ is recognized as the authoritative source for marketplace intelligence on the global technology and business services industry. For 74 consecutive quarters, it has detailed the latest industry data and trends for financial analysts, enterprise buyers, software and service providers, law firms, universities and the media. In 2016, the ISG Index was expanded to include coverage of the fast-growing as-a-service market, measuring the significant impact cloud-based services are having on digital business transformation. ISG also provides ongoing analysis of automation and other digital technologies in its quarterly ISG Index presentations.
For more information about the ISG Index, visit this webpage.
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 700 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,300 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.
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Will Thoretz, ISG
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Cait Buckley, Matter Communications for ISG
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