Demand for IT and business services in the Americas continued to climb in the third quarter, reaching record highs and eclipsing previous records from the second quarter as enterprises accelerate their post-pandemic digital transformations, 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 reached a record $11.6 billion of combined market (both as-a-service and managed services) ACV in the second quarter, up 37 percent. It marked the first time the region has surpassed $10 billion of combined ACV in a quarter, exceeding the previous record of $9.7 billion, set in the second quarter this year, by 19 percent.
Cloud-based as-a-service ACV soared 51 percent over the prior year, to a record $6.9 billion, the fastest growth rate for this segment since ISG began tracking it in 2014. Infrastructure-as-a-service (IaaS) surged 53 percent, to a record $4.6 billion, and software-as-a-service (SaaS) shot up 48 percent, to a record $2.4 billion.
Traditional managed services advanced 21 percent, to a record $4.7 billion. IT outsourcing (ITO) jumped 26 percent, to a record $3.4 billion, while business process outsourcing (BPO) rose 9 percent, to $1.3 billion. A new high of 282 managed services contracts were awarded this quarter, including five megadeals totaling $1.4 billion, the highest such ACV in the past 14 years.
“U.S.-based enterprises across all industries continue to invest in improving customer experiences, reducing overall costs, and optimizing their IT environments,” said Todd Lavieri, vice chairman and president, ISG Americas and Asia Pacific. “ACV has steadily increased every quarter since a slump at the end of 2020, with rising demand for cloud computing, applications and other digital technologies driving the market coming out of the pandemic. We foresee continued growth in 2022.”
Over the first nine months of 2021, records were set across the board. The combined market reached a record $30.3 billion of ACV, up 20 percent, including record ACV for as-a-service ($18.2 billion, up 26 percent) and managed services ($12.1 billion, up 13 percent).
Within as-a-service, IaaS reached a record $12.0 billion, up 26 percent, and SaaS hit a record $6.2 billion, up 25 percent. On the managed services side, ITO was a record $8.6 billion, up 8 percent, including 28 percent growth in application development and maintenance (ADM) services even as infrastructure services declined. BPO reached a record $3.5 billion, up 27 percent, led by growth in engineering/R&D and contact center services.
In the IaaS segment, significant deals in the third quarter included CIBC’s multiyear agreement with Microsoft to use Azure as its primary cloud platform. Oracle Cloud Infrastructure also won a large deal with Telefonica Brasil to move its development and testing data center workload to OCI. And AWS inked a sizable deal with Sun Life, which will use AWS’s portfolio of cloud technologies.
In the SaaS space, Google expanded its use of Workday applications, and Adobe signed Experience Cloud deals with Capital One, CVS, Ford, Fidelity and The Gap. Oracle, meanwhile, signed a large deal with Humana for Oracle Fusion Cloud ERP and EPM.
2021 Global Forecast
ISG is forecasting the market for cloud-based services (IaaS and SaaS) will grow 25 percent globally in 2021, up from its 21 percent growth forecast last quarter. The firm also is raising its forecast for managed services growth to 10.1 percent, up from its prior forecast of 9 percent.
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 76 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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