We held the 74th consecutive ISG Index call this week. If you weren’t able to attend – or just want a quick summary of the headlines – this week’s Insider is for you. We’ll return to our regular format next week. If you attended the call, a reminder to please take two minutes to complete the post-Index survey here.
TOP FINDINGS
The global economic picture continues to improve. Managed services is returning to pre-pandemic norms. We see sustained strength in the as-a-service economy, and mega-deal activity remains solid.
- Global combined market ACV of $17.1 billion was up 11 percent year over year; this was the first time the combined market exceeded $17 billion.
- Managed services ACV of $7.2 billion was up 7 percent year over year; for the second consecutive quarter, managed services is over $7 billion.
- More than 500 managed services contracts were awarded in Q1, up 12 percent year over year.
- As-a-service ACV had its best quarter ever at $9.9 billion, which was up 15 percent year over year.
DATA WATCH
SERVICE LINES
Despite a record number of contracts awarded in Q1, the ITO market was flat. ADM had its best quarter ever with $3.1 billion in ACV; it now makes up 54 percent of ITO ACV. While IaaS growth slowed, SaaS surpassed $2.5 billion in ACV for the first time ever.
- ITO ACV of $5.8 billion was up 0.8% year over year but was up 19 percent from 2Q20 lows.
- BPO was up 43 percent year over year with most growth in industry-specific BPO and ER&D.
- IaaS ACV surpassed $7 billion for the first time, but year-over-year growth decelerated to 18 percent from 36 percent in Q4.
- SaaS ACV of $2.6 billion was up 7 percent year over year.
AMERICAS
All the gains for Q1 in the Americas came from the as-a-service sector. Contracting activity was up, logging the second best quarter ever in number of awards.
- Combined market ACV of $8.6 billion was up 6 percent year over year and up 18 percent from the previous quarter.
- Managed services ACV of $3.4 billion was down 1 percent year over year but up sequentially by 32 percent.
- As-a-service ACV of $5.2 billion was up 11 percent year over year, making Q1 the first ever $5 billion as-a-service quarter in the Americas.
EMEA
The EMEA market set new highs with back-to-back quarters of $6 billion in ACV – adding over $1.4 billion of ACV from the pandemic lows.
- Combined market ACV of $6 billion was up 20 percent year over year but did see a slight sequential pullback.
- Managed services ACV of $3.5 billion was up 23 percent year over year on the back of a second straight $3 billion quarter.
- As-a-service ACV of $2.5 billion was up 16 percent year over year, a new high for the region.
ASIA PACIFIC
Asia Pacific has become an as-a-service region. Managed services now make up only about 15 percent of the total ACV in the region.
- Combined market ACV of $2.6 billion was up 11 percent year over year but was down 9 percent from Q4 2020.
- Managed services ACV dropped below $390 million and was down 25 percent year over year, with contracting activity the lowest it’s been in five years.
- As-a-service ACV of $2.2 billion was up 22 percent year over year and was on par with the previous quarter.
About the author
Stanton Jones
Stanton leads ISG's Index research, helping providers, investors and ISG clients make sense of the global IT services sector. Stanton’s weekly newsletter, the Index Insider, is read by thousands of market stakeholders each week. An ISG Digital Fellow, Stanton has been quoted in Fast Company, Forbes and CIO.com, and has appeared on national cable news.
