As-a-service ACV climbs 51%, topping US$1 billion for the second straight quarter
YTD, as-a-service now accounts for 63% of region's sourcing, up from 45% two years ago
SYDNEY, Nov. 6, 2018 /PRNewswire/ -- The Asia Pacific sourcing market continues to be bolstered by rising demand for cloud-based as-a-service solutions, with annual contract value for these services topping US$1 billion for the second straight quarter, according to the latest state-of-the-industry report from Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.
Data from the Asia Pacific ISG Indexâ„˘, which measures commercial outsourcing contracts with annual contract value (ACV) of US$5 million or more, show third-quarter as-a-service ACV reached US$1.05 billion, up 51 percent over the prior year and trailing only the record US$1.09 billion set in the second quarter of 2018. Traditional sourcing, meanwhile, turned in its weakest quarter since the first quarter of 2017, with ACV of US$468 million, down 41 percent from the prior year.
Combined ACV for the Asia Pacific sourcing market was US$1.5 billion â€“ the second straight quarter at or above this mark â€“ but up only 2 percent because of traditional sourcing's drag on results. The region set a quarterly record for combined ACV, at US$1.9 billion, in the second quarter of 2018.
In the as-a-service segment, demand for both Infrastructure-as-a-Service (IaaS), up 53 percent to US$891 million, and Software-as-a-Service (SaaS), up 42 percent to US$163 million, contributed to the robust third-quarter growth. Traditional sourcing, meanwhile, saw contract volume dip 20 percent from last year; the 39 contracts awarded in the third quarter were the lowest number since the fourth quarter of 2016. Traditional sourcing weakness was spread across all major verticals and every geographic market except for Japan. Even ACV for application development and maintenance (ADM) services was off 8 percent, after two strong quarters to start the year.
Through the first nine months of 2018, Asia Pacific's combined market ACV of US$4.8 billion rose 28 percent, the highest level ever for this period. As-a-service sourcing ACV surged 58 percent, to US$3 billion, but after an exceptionally strong first half, traditional sourcing dipped into negative territory for the year, down 3 percent, to US$1.8 billion.
"The Asia Pacific sourcing market continues to be fueled by high demand for cloud-based services, especially in emerging markets where providers see the potential for explosive future growth and are placing big bets on IaaS and SaaS services," said Lisa Borden, partner and head of ISG Australia and New Zealand (ANZ). "As-a-service now accounts for 63 percent of the region's combined market, up from 45 percent just two years ago. For many of the big providers, the whole game is about data center build-out to meet the growing demand for IaaS services, while the SaaS market is rising as enterprises continue to move apps to the cloud."
Globally, third-quarter ACV for the combined market advanced 19 percent to US$11.7 billion. All the growth was attributable to as-a-service sourcing, which reached another record high with ACV of US$5.7 billion, up 47 percent. Traditional sourcing was flat for the quarter, at US$6.0 billion.
About the ISG Indexâ„˘
Now in its 64th consecutive quarter, the ISG Indexâ„˘ provides a quarterly review of the latest sourcing industry data and trends for clients, providers, analysts and the media. For more than 15 years, it has been the authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider performance. In 2016, the ISG Indexâ„˘ 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 Indexâ„˘ presentations.
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 700 clients, including 75 of the top 100 enterprises in the world, 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; technology 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 professionals operating in more than 20 countriesâ€”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 www.isg-one.com.
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