Resilience After a Prolonged Slump
The global market for IT and business services has soared back to success in the third quarter, reclaiming its peak performance after enduring a lengthy downturn that hit rock bottom over a year ago. This resurgence comes as a phoenix rising from the ashes, demonstrating remarkable resilience and steadfast growth in the face of adversity.
Record-Breaking Figures
Data from the ISG Index™ reveal that the combined global market for managed services and cloud-based as-a-service has reached a record-breaking $26.7 billion in Annual Contract Value (ACV) in the third quarter, a notable 15% surge compared to the previous year. This achievement marks the sector’s highest point since its former peak of $26.4 billion in Q1 2022, showcasing a consistent upward trajectory over the past five quarters following a low of $23.2 billion in Q2 last year.
Positive Trends in Segments
The as-a-service (XaaS) segment experienced a robust 23% growth year-over-year, hitting $15.8 billion in ACV, the segment’s most substantial increase since Q2 2022. Notably, Infrastructure-as-a-Service (IaaS) saw a striking 30% surge in ACV, reaching $11.9 billion, fueled by advancements in AI driving investment in cloud-based AI platforms. The stellar performance of major cloud service providers, including AWS, Microsoft Azure, and Google Cloud, has further propelled this growth trend.
Challenges and Opportunities
While the managed services segment achieved a record ACV of $10.9 billion in Q3, it faced constraints due to a slowdown in the BFSI sector, a key vertical market for outsourcing. Despite this hurdle, the as-a-service domain continues to flourish as enterprises leverage cloud technology for their cutting-edge GenAI initiatives, establishing a fertile ground for innovation and digital transformation.
Forecast and Outlook
Looking ahead, ISG maintains its 2024 forecast with 2% revenue growth projected for managed services and a robust 14% growth anticipated for XaaS. The outlook for 2025 hints at even more significant growth opportunities on the horizon, buoyed by factors such as economic policies and evolving industry dynamics.