Asia Pacific Tech Services Market Driven by Strong Demand for Managed and Cloud Services in Q4: ISG Index™ Investing.com

ACV in the combined market grew by 23%, with managed services by 33%, XaaS by 20%

ISG predicts managed services growth of 4.5%, XaaS growth of 18% globally in 2025.

SYDNEY–( BUSINESS WIRE )– The Asia-Pacific IT and business services market was driven in the fourth quarter by double-digit growth in cloud and managed services, driven in part by growing demand for artificial intelligence, according to the latest state of the industry report Information services Group (ISG) (Nasdaq: NASDAQ: ), a leading global technology research and consulting firm.

The Asia Pacific ISG Index™, which measures commercial outsourcing contracts with an annual contract value (ACV) of US$5 million or more, shows that fourth quarter ACV for the combined market (both cloud-based XaaS and managed services) increased by 23 percent compared to previous years, to 5.5 billion dollars. It was the fourth quarter in a row. The combined Asia-Pacific market grew year-over-year, with average quarterly growth of more than 16 percent over the period. Compared to the third quarter, the market grew by 20 percent sequentially.

ACV’s managed services jumped 33 percent to US$1.1 billion, up 45 percent from the previous quarter. A total of 72 contracts were awarded in the fourth quarter, which is 29 percent more than the previous year. Within managed services, IT outsourcing (ITO) grew 25 percent to $825 million, driven by application development and maintenance (ADM) spending, while business process outsourcing (BPO) grew 59 percent to $320 million, supported by growth in customer engagement and engineering, research and development services.

In the cloud space, XaaS ACV grew 20 percent to $4.3 billion, driven by 20 percent growth in Infrastructure as a Service (IaaS), to $3.8 billion, and 20 percent growth in Software as a Service (SaaS), to 527 million US dollars.

Companies are increasingly turning to service providers, looking for specialized expertise and capabilities to accelerate their digital transformations, said Michael Gale, partner and regional head, ISG Asia Pacific. Managed services growth in 2024 was outstanding, with ACV exceeding US$1 billion in three out of four quarters last year. This has never happened before.

Gale pointed to growing interest in artificial intelligence as a catalyst for continued growth in cloud demand. Enterprises are migrating more workloads to the cloud, not only for efficiency and cost savings, but also to provide more data processing capacity to achieve their AI ambitions, he said.

Full year results

For the full year, the combined Asia-Pacific market generated a record ACV of US$19.7 billion, up 16 percent year-over-year and just shy of the previous record set in 2022. In comparison, the combined market fell 13 percent on an annual basis in 2023.

ACV managed services grew 26 percent to a record US$4.4 billion, breaking the previous record set in 2012. A total of 276 managed services contracts were awarded in 2024, an increase of 28 percent. ACV of new contracts increased by 27 percent, to a record 3.3 billion US dollars.

Within managed services, ITO ACV grew 12 percent to a record US$3.1 billion, led by growth in ADM, data center and end-user computing services. BPO jumped 82 percent to US$1.3 billion, with strong growth in customer engagement, HR outsourcing and industry-specific services.

The XaaS segment advanced 13 percent to $15.3 billion in ACV, reversing course after a 16 percent decline in 2023. IaaS rose 13 percent to $13.4 billion, while SaaS rose 16 percent to 1, 9 billion USD.

Geographically, all markets were up over the year except India, which fell 36 percent. Both Australia and New Zealand, up 16 percent to US$1.4 billion, and Japan, up more than 200 percent to US$1.1 billion, recorded their best years ever, while China, with a growth of 80 percent, to 411 million US dollars, had its second year – the best result ever. Japan and China benefited from the award of larger contracts.

By industry verticals, all sectors achieved positive results, except for production, which fell by 8 percent. BFSI, the region’s largest outsourcing industry, advanced 57 percent year-over-year, while the region’s third-largest vertical, media and telecommunications, grew 13 percent for the year.

Global forecast for 2025

For the full year, ISG forecasts 4.5 percent revenue growth for managed services, up from 1.7 percent growth in 2024 and 18 percent revenue growth for XaaS, consistent with the prior year.

Globally, we expect a gradual recovery in corporate demand for IT and business services, Gale said. Modernization of technology and adoption of artificial intelligence will act as a market headwind, and we expect a recovery in BFSI consumption this year.

About the ISG Index™

The ISG Index™ is recognized as the authoritative source of market data on the global technology and business services industry. For 89 consecutive quarters, it has detailed the latest industry data and trends for financial analysts, enterprise customers, software and service providers, law firms, universities and the media.

The 4Q24 Global ISG Index results were presented during a webcast on January 16. To view a replay of the webcast and download the presentation slides, visit this website.

About ISG

ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and consulting firm. As a trusted business partner to more than 900 clients, including more than 75 of the world’s 100 largest enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and accelerate growth. The company specializes in digital transformation services, including AI, cloud and data analytics; resource consulting; managed risk management and services; Network operator services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006 and headquartered in Stamford, Connecticut, ISG employs more than 1,600 digitally ready professionals working in more than 20 countries” a global team known for its innovative thinking, market impact, deep industry and technology expertise, and world-class research and analytical capabilities based on the most comprehensive market data in the industry. For more information, visit www.isg-one.com.

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Media contacts:
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.