Asia Pacific’s IT, Business Services Market Up in Q1 But Growth Remains Uneven

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According to the latest state-of-the-industry report from technology research and advisory firm Information Services Group (ISG), Asia Pacific’s IT and business services market grew by 28% in Q1 2022, but demand slowed dramatically from a record fourth quarter as the region continues to produce uneven results.

The Asia Pacific ISG Index, which measures commercial outsourcing contracts with Annual Contract Value (ACV) of US$5 million or more, shows first-quarter ACV for the combined market—including both as-a-service (XaaS) and managed services—reached $4.2 billion, up 28%, but that was the region’s lowest growth-rate in the last four quarters. First-quarter ACV was off 10% from the region’s fourth-quarter high of $4.7 billion, the steepest quarter-over-quarter (QoQ) drop in more than two years.

“This is the fourth straight quarter the region has produced ACV of at least $4 billion, but sequential growth has been uneven,” said Scott Bertsch, regional leader ISG Asia Pacific. “It’s been a bit of a roller-coaster-ride recently, with each new quarterly high followed by a sequential drop in ACV.”

As with the broader market, XaaS spending rose 28% in Q1 2022, to $3.7 billion, but was down 1% from Q4 2021. Infrastructure-as-a-Service (IaaS) rose 3%, to $3.3 billion, but was down 1% against the prior quarter, while Software-as-a-Service (SaaS) advanced 14% over 2021, to $400 million, but was flat with Q4.

Managed services, likewise, grew 28% in Q1 2022 QoQ to $498 million, but dropped 47% against Q4 2021. The 28% year-over-year (YoY) growth rate was the slowest in the last four quarters, with the three preceding quarters averaging 54% annual growth.

Within managed services, IT outsourcing (ITO) was up 31% QoQ, to $370 million, but was down 50% against Q4. Business process outsourcing (BPO) grew 18% QoQ, to $128 million, but fell 33% versus Q4 2021.

The region generated 45 managed services contract awards in Q1 2022, up 50% versus a soft first quarter last year, but down 26% versus a much-stronger Q4. The YoY growth in volume was driven entirely by the smallest band of contract awards measured by the ISG Index – those falling within the US $5 million to US $10 million range. Contract awards at this level were up 94% versus last year.

The Australia-New Zealand region, at $114 million of managed services ACV, was down 5% YoY, and off 77% against a very strong Q4. Both South Korea (up 67%) and Japan (up 25%) advanced versus the prior year off a small base, while the ASEAN region was up significantly as it posted its third straight quarter with ACV of more than $100 million.

2022 Global Forecast

ISG is forecasting the global market for cloud-based XaaS (IaaS and SaaS) will grow 22% for the year, up from its 20% forecast last quarter, while the global market for managed services is expected to grow 5.1%, unchanged from last quarter’s forecast.