The combined market grew at the fastest annual rate ever – 44 percent – to a record $16.1 billion
Q4 slows due to lower demand for IaaS in China
Sydney, January 12 2022–(BUSINESS WIRE)–The Asia-Pacific IT and business services market grew at the fastest pace ever, reaching an all-time high in 2021, even as demand for cloud-based infrastructure services slowed back-to-back in the fourth quarter, 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 Asia Pacific ISG Index™, which measures commercial outsourcing contracts with an annual contract value (ACV) of $5 million or more, shows the full-year ACV of the embedded market — including as a service (XaaS) and managed services — at a record high. It reached US$16.1 billion, up 44 percent, the best annual growth rate in the region since ISG began tracking the consolidated market in 2014.
For the full year, XaaS spending rose 47 percent, to a record $13.2 billion, including 47.5 percent growth for infrastructure as a service (IaaS), to $11.7 billion, and 40 percent growth for software as a service. service (SaaS), to $1.5 billion, both of which are new records.
Managed services advanced 32 percent, to $2.9 billion, with information technology outsourcing (ITO) growing 26 percent, to $2.3 billion, and business process outsourcing (BPO) up 57.5 percent, to $628 million. The region posted a record 213 managed service contracts in 2021, including 24 contracts worth over $30 million, the highest mark of its kind since 2014.
All major markets in the region posted gains in managed services in 2021, including Japan (up 49%), Australia and New Zealand (up 38%), and China (up 30%).
Fourth Quarter Results
The combined market value of ACV in the fourth quarter, at $4.4 billion, was 31 percent higher than the previous year’s period affected by the Covid virus, but rose only 1 percent sequentially from the third quarter of 2021, affected by the slowdown in spending in the services sector. Internet Banking Services (IaaS).
The XaaS market is up 28 percent overall, to $3.4 billion, but is down 7 percent sequentially, with IaaS down 8 percent quarter-on-quarter, and SaaS down 2 percent sequentially. Compared to the previous year, IaaS was up 25%, to $3.0 billion, and SaaS was up 51%, to $393 million.
Meanwhile, managed services were up 43 percent from a year earlier, to $931 million, and 50 percent versus the third quarter. ITO is up 55 percent year-over-year, to $741 million, up 70 percent from the third quarter of 2021. Business process outsourcing is up 10 percent, to $190 million, but only 2 percent higher than previous quarter. A total of 61 managed services contracts were awarded in the fourth quarter, an increase of 15 percent over the previous year.
“2021 was an excellent year for Asia Pacific, as companies across the region continued to embrace cloud computing as the backbone of digital transformation,” said Scott Burch, partner and regional leader at ISG Asia Pacific. “We have also seen a growing demand for traditional managed services, with a record level of contracting and particularly strong growth in application development, maintenance and network services on the ITO side, and facilities management and engineering/R&D services on the BPO side.”
Speaking about the region’s slowdown in the fourth quarter, Birch said, “The market slowdown on a sequential basis was mainly limited to China and in the IaaS segment. Excluding China, IaaS is up 68 percent year over year, and 18 percent quarter on quarter.” .
2022 Global Outlook
ISG expects the global market for cloud-based XaaS (IaaS and SaaS) to grow by 20 percent, at the lower end of the range 20 percent to 25 percent in recent years, and the global market for managed services will advance by 5.1 percent in 2022, Before average annual growth of 2 percent from 2010 through 2020.
About ISG Index™
The ISG Index™ has been recognized as the trusted source of market information on the global technology and business services industry. Over the course of 77 consecutive chapters, it has detailed the latest industry data and trends for financial analysts, institutional buyers, software and service providers, law firms, universities, and the media. In 2016, the ISG Index was expanded to cover the rapidly growing Market as a Service, measuring the significant impact of cloud-based services on digital business transformation. ISG also provides ongoing analysis of automation and other digital technologies in its quarterly ISG Index presentations.
For more information on the ISG Index, visit this webpage.
ISG (Information Services Group) (NASDAQ: III) is a leading global technology research and advisory company. As a trusted business partner for more than 700 customers, including more than 75 of the world’s 100 largest companies, ISG is committed to helping businesses, public sector organizations, service and technology providers achieve operational excellence and faster growth. The company specializes in digital transformation services, including automation, cloud and data analytics; sourcing consulting; governance and risk services management; network carrier services; design strategy and operations; the management of change; Market intelligence and technology research and analysis. Founded in 2006, headquartered in Stamford, Connecticut, ISG employs more than 1,300 digitally-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 market data. The most comprehensive in the industry. For more information, visit www.isg-one.com.
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