Asia Pacific Sourcing Hits New Record in Q4: ISG Index. Region sees double-digit growth in all segments, reversing Q3 downturn
The Asia Pacific technology and business services market reached a record high in the fourth quarter, rebounding sharply from a pandemic-induced downturn in Q3, 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 annual contract value (ACV) of US $5 million or more, shows the region generated a record US $2.6 billion in combined-market ACV in the fourth quarter, up 35 percent over the prior year. All market segments were up by double digits.
Cloud-based services (as-a-service) rose 30 percent, to US $1.9 billion, a new quarterly record. Within the segment, infrastructure-as-a-service (IaaS) climbed 33 percent, to a record US $1.7 billion, while software-as-a-service (SaaS) advanced 12 percent, to US $257 million.
Managed services, against a soft quarter a year ago, soared 55 percent, to US $641 million, with IT outsourcing (ITO) up 76 percent, to US $473 million, and business process outsourcing (BPO) up 16 percent, to US $168 million. The strong fourth quarter came after the managed services market in Asia Pacific fell in the third quarter to its lowest level in 14 years, as buyers retreated amid pandemic concerns. Quarter-over-quarter, managed services was up 90 percent.
For all of 2020, Asia Pacific’s combined market produced a record US $9.0 billion of ACV, up 2 percent, boosted by a record US $6.9 billion of as-a-service ACV, up 16 percent over the prior year. Managed services, however, slumped 27 percent, to US $2.0 billion.
“Managed services finished the year on a high note, with Australia/New Zealand and the BFSI sector turning in their best quarterly performance in two years,” said Scott Bertsch, partner and regional leader, ISG Asia Pacific. “The strong finish, however, belies the overall weakness in 2020 brought on by the pandemic. For the first time since 2001, the region did not have any mega-deals.”
ISG defines a mega-deal as a contract with more than US $100 million in ACV.
Bertsch pointed out that the Asia Pacific market continues to be dominated by the as-a-service sector, which accounted for 77 percent of the region’s combined results for the year, far and away the highest share for cloud-based services of any region.
Although SaaS ACV dipped slightly for the full year, IaaS surged 19 percent, as public cloud providers extended their reach and increased share. AWS, for one, announced plans to open a second infrastructure cloud region in India, and attracted customers including RBL Bank, Axis Bank and Mahindra Electric Mobility.
Within managed services, full-year ITO took a 26 percent dive from the prior year, hitting a low not seen since 2016. Both Infrastructure and application development and maintenance (ADM) services saw double-digit declines due to a lack of large deals.
Bright spots in ADM were the nine-year contract Hindustan Aeronautics signed with Tech Mahindra for ERP implementation, and TCS’s work to modernize the application estate of AGL Energy in Australia. Among notable infrastructure deals, Singapore’s DBS Bank signed a seven-year contract with IBM to simplify its IT infrastructure, and Japan’s Rakuten Mobile inked an agreement with Tech Mahindra for managed IT, security and network services.
ISG is forecasting the market for cloud-based services will grow 20 percent globally in 2021, and the market for managed services will grow 3 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 73 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, 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.