Asia Pacific IT and business services spending cracks $3B in a quarter

Managed services turned in its best quarter in two years with annual contract value soaring to US$929 million.

Asia Pacific spending on IT and business services surpassed US$3 billion for the first time in a quarter, with record levels of spending recognised across both cloud-based and traditional managed services.

This is according to the latest state-of-the-industry report from research firm Information Services Group (ISG).

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 US$3.4 billion in combined market ACV in the second quarter, up 59 per cent against a soft quarter last year at the outset of the pandemic and up 35 per cent from the first quarter.

The annual contract value for cloud-based services (as-a-service) came in at a record US$2.4 billion, up 50 per cent over last year. Looking into these services, infrastructure-as-a-service (IaaS) was up 52 per cent to a record US$2.1 billion and software-as-a-service (SaaS) was up 38 per cent to US$312 million.

Managed services turned in its best quarter in two years, with annual contract value soaring 87 per cent, to a record US$929 million, according to ISG.

IT outsourcing reached a record US$800.1 million, up 80 per cent, and business process outsourcing rocketed 148 per cent, to US$129 million.

Within the region, most markets delivered sizeable year-over-year growth in managed services, including Australia and New Zealand (A/NZ), China, Japan and South Asia, with only Korea declining versus the prior year.

“The second quarter was a real standout for the Asia Pacific region, with record demand in virtually every segment and strong growth across the board,” ISG Asia Pacific partner and regional leader Scott Bertsch said. “The results in A/NZ, the region’s largest managed services market, were particularly encouraging. With more than US$300 million of ACV this quarter, A/NZ delivered its best performance since the end of 2018.”

For the first half of 2021, the combined market generated a record US$5.8 billion of ACV, up 32 per cent. As-a-service, at a record US$4.5 billion, was up 33 per cent, and managed services sat at US$1.3 billion, up 28.5 per cent.

Within as-a-service, IaaS reached a record US$3.9 billion, up 34 per cent, and SaaS hit a record US$614 million, up 23 per cent.

The report follows a recent study that revealed the dedicated cloud infrastructure-as-a-service (DCIaaS) market is set skyrocket up to US$14 billion by 2025 — more than 100 times those seen in 2020.