SYDNEY--(BUSINESS WIRE)--
Spending on cloud services in Asia Pacific was down sharply in the third quarter, as the market was weighed down by economic concerns and continuing business disruptions in China, the latest state-of-the-industry report from Information Services Group () (Nasdaq: ), a leading global technology research and advisory firm, finds.
The Asia Pacific ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of US $5 million or more, shows third-quarter ACV for the combined market (managed services and cloud-based XaaS) dropped 29 percent, to US $3.1 billion. Although the combined market rose 3 percent sequentially from a weak second quarter, it was down sharply from its peak of US $5 billion in the fourth quarter of 2021.
Cloud-based XaaS continues to dominate this market, accounting for 80 percent of combined market ACV year to date. But that was down from an 83 percent share last year, as spending on cloud services has rapidly decelerated the last two quarters.
In the third quarter, XaaS ACV slumped 37 percent versus the prior year, to US $2.4 billion, but was up 9 percent against a weak second quarter. Within this segment, infrastructure as-a-service (IaaS) fell 40 percent versus the prior year, to US $2.0 billion, while software-as-a-service (SaaS) fared a bit better, down 15 percent, to US $390 million.
“Much of the slump in IaaS can be attributed to lower demand for cloud services provided by China’s big four hyperscalers,” said Scott Bertch, partner and regional leader, ISG Asia Pacific. “The country’s crackdown on tech companies, combined with its zero-Covid policy, makes it difficult for enterprises to do business with China’s hyperscalers. In general, enterprises are slowing their spending on cloud services in response to weak economic conditions.”
On the managed services side, ACV advanced 17 percent year on year, to US $745 million. Spending on IT outsourcing (ITO) rose 23 percent, to US $545 million, while business process outsourcing (BPO) rose 1 percent, to US $199 million. The ITO market was buoyed by strong demand for application development and maintenance services, while the BPO market saw strong demand for contact center services.
There were 53 managed services contracts signed during the third quarter, down 12 percent.
From a geographic standpoint, the India and Southeast Asia markets were up substantially from last year, while enterprises pulled back on spending in Japan and China. The region’s largest geographic market by ACV, Australia-New Zealand (ANZ), posted a second straight quarter with ACV greater than US $250 million. Spending in ANZ was up 4 percent versus the prior year.
Year-to-Date Results
For the first nine months of 2022, Asia Pacific’s combined market generated ACV of US $10.6 billion, down 14 percent versus the same period last year, the steepest decline since ISG began measuring the combined market in 2015. XaaS ACV declined 17 percent, to US $8.6 billion, while managed services rose 2 percent, to US $2.1 billion. Enterprises signed 177 managed services contracts in the period, the highest volume ever.
2022 Global Forecast
ISG sees economic uncertainty caused by rising interest rates, energy shortages, supply chain disruptions and continuing inflation dampening enterprise demand in the near term. The firm maintained its growth forecast for managed services at 3.5 percent for the year, and lowered its forecast for XaaS to 10.5 percent, down from 18 percent in the prior quarter.
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 80 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 .
About ISG
ISG (Information Services Group) (Nasdaq: ) is a leading global technology research and advisory firm. A trusted business partner to more than 800 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 .
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