Strong Cloud Demand Fuels Q1 Double-Digit Growth in Asia Pacific’s IT and Business Services Market, ISG Index™ Finds
Combined market up
Managed services slumps
The Asia Pacific ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of US
Managed services ACV, meanwhile, slumped 26 percent, to US
A total of 57 managed services contracts were awarded in the first quarter, down 14 percent year on year. A major driver of the shortfall was a decline in the number of smaller deals, those between US
“The Asia Pacific market continued to be driven by strong demand for cloud-based services, as companies forged ahead with digital transformation and AI adoption,” said Michael Gale, partner and regional leader, ISG Asia Pacific. “The focus remains on cost resiliency, productivity and IT modernization.”
Gale said the market is likely headed into a period of increased volatility, driven by heightened economic uncertainty and the impact of
One potential sign of that impact, Gale said, is the sharp decline in the number of small deals during the first quarter. “That could be a signal that discretionary spending is under pressure,” he said.
Results by Industry, Geography
Most industries turned negative versus the prior year, with the exception of the media/telecoms sector, which advanced by triple digits, and the region’s second largest vertical, manufacturing, which advanced nearly 7 percent. On the other hand, financial services, the region’s largest vertical, fell by 28 percent year on year.
By geography, most markets were down versus the prior year.
2025 Global Forecast
Heightened uncertainty from trade policy, geopolitical tensions and evolving regulations are beginning to weigh on the industry’s second-quarter outlook, ISG said.
ISG’s forecasts for market growth in 2025 are based on two scenarios. In the first scenario, the tariff environment stabilizes by midyear, and the market sees faster decision-making in the second half. Under that scenario, ISG forecasts XaaS growth of 18 percent for 2025, unchanged from its January forecast. ISG’s forecast for managed services growth would be 1.3 percent, down from its January forecast of 4.5 percent.
In the second scenario, tariffs would extend through the third quarter or beyond, compounded by immigration enforcement, prevailing wage issues or retaliatory digital services taxes in the EU, resulting in a longer pullback in discretionary demand and delays in award conversion. In this more bearish case, ISG forecasts XaaS growth for the year would moderate to 15 percent, while managed services spending would be negative 2.4 percent, a nearly 700 basis-point swing from its January forecast.
“We remain cautious in our base case, but not pessimistic,” said Gale. “The signals from Q1 are fundamentally strong. The shift we’re seeing is not one of declining demand, but one of delayed commitment.”
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 90 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.
The 1Q24 Global ISG Index results were presented during a webcast on April 10. To view a replay of the webcast and download presentation slides, visit this webpage.
About ISG
ISG (Nasdaq: III) is a global AI-centered technology research and advisory firm. A trusted partner to more than 900 clients, including 75 of the world’s top 100 enterprises, ISG is a long-time leader in technology and business services that is now at the forefront of leveraging AI to help organizations achieve operational excellence and faster growth. The firm, founded in 2006, is known for its proprietary market data, in-depth knowledge of provider ecosystems, and the expertise of its 1,600 professionals worldwide working together to help clients maximize the value of their technology investments.
View source version on businesswire.com: https://www.businesswire.com/news/home/20250415818426/en/
Press:
Will Thoretz, ISG
+1 203 517 3119
will.thoretz@isg-one.com
Julianna Sheridan, Matter Communications for ISG
+1 978-518-4520
isg@matternow.com
Source: Information Services Group, Inc.