ISG Index™: Global Sourcing Slows in Q4 After Record Q3

Combined global market ACV up 6.7% in Q4, but off from record $14.2 billion in Q3; Q4 results propelled by 14.2% growth in cloud-based as-a-service segment; For full year, combined global market at record $55.7 billion, up more than 10% over 2018; ISG sees as-a-service market growing 23.5% in 2020

STAMFORD, Conn., Jan. 14, 2020 (GLOBE NEWSWIRE) -- The global sourcing market in the fourth quarter fell back from its record-setting third-quarter performance, despite continued strong demand for cloud-based services, 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 ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, show fourth-quarter ACV for the combined global market (including both as-a-service and managed services) rose 6.7 percent over the prior year, to $13.9 billion, but was down sequentially from the record $14.2 billion of ACV in the third quarter.

The fourth-quarter result was paced by 14.2 percent growth in the as-a-service market, to $7.0 billion, as enterprise demand remains strong for cloud-based services (Infrastructure-as-a-Service and Software-as-a-Service). Although down 2 percent from the prior quarter, it was only the second time ever as-a-service reached $7.0 billion of ACV in a quarter. Managed services, meanwhile, was relatively flat for the quarter, with ACV of $6.9 billion, up 0.1 percent.

“Digital is the default position for enterprises in today’s technology-driven world,” said Steve Hall, president of ISG. “We don’t see macroeconomic headwinds slowing the pace of digital change in 2020; on the contrary, we see the cost-savings gained through digitization being reinvested in new digital growth initiatives, as large enterprises are forced to reinvent themselves to compete with upstart disruptors. It’s clear the digital tailwinds are stronger than the macroeconomic headwinds. Digital will continue to propel the overall market forward.”

2020 Forecast

ISG is forecasting the market for cloud-based services will grow 23.5 percent globally in 2020, and the market for managed services will grow 3.2 percent.

“The hyperscaler market will continue to be competitive across the globe,” said Hall. “We see the rapid rise of China-based Infrastructure-a-Service providers and the impressive new capabilities implemented within Google Cloud Platform increasing competition and offering more choice for enterprises. The battle for European supremacy will continue between AWS and Microsoft, and many Software-as-a-Service providers will need to defy the law of large numbers to continue their high-flying ways in 2020.”

Traditional managed services providers, meanwhile, will have to pivot to more digitally led solutions in 2020, Hall said. “As the largest service providers rebalance their portfolios, it will be interesting to see if they continue to emphasize digital solutions or revert to pursuing legacy deal flow.”

Full-Year Results

For 2019, the combined global market reached a record $55.7 billion, up 10.3 percent over the prior year. Full-year results were driven by a 20.6 percent increase in as-a-service ACV, to a record $28.0 billion. Managed services, at $27.7 billion, also turned in a record year, albeit with growth of only 1.6 percent. The number of managed services contracts signed in 2019—1,771—was down 7 percent versus the prior year.

Globally, both Infrastructure-as-a-Service (IaaS), at $20.4 billion, up 23 percent, and Software-as-a-Service (SaaS), at $7.5 billion, up 15 percent, reached record highs in 2019. The IT outsourcing (ITO) market, meanwhile, declined 1 percent, to $20.9 billion, even as the business process outsourcing (BPO) market rose 9 percent, to $6.8 billion, its highest ACV in three years.


The combined market in the Americas fell 3 percent in the fourth quarter, to $6.7 billion, on softer managed services results, down 18 percent, to $3.0 billion. Although falling back from its record high in the third quarter, as-a-service ACV was up 14 percent in the fourth quarter, to $3.7 billion, propelled by record SaaS ACV of $1.3 billion, up 18 percent.

For the full year, the combined market generated record ACV of $27.9 billion, up 8 percent, fueled by 23 percent growth in as-a-service, to a record $14.9 billion. As-a-service accounted for more than 50 percent of the Americas market for the first time ever in a full year. Managed services, at $13.0 billion, was down 5 percent for the year.

Europe, Middle East and Africa (EMEA)

EMEA delivered a record-setting fourth quarter, with combined market ACV of $5.2 billion, up 25 percent versus the prior year and 21 percent against the previous quarter. Powered by three mega deals valued at over $100 million per year, managed services rose 39 percent, to $3.5 billion, its best quarter in almost three years. Both the UK and DACH markets had $1 billion quarters in managed services. The as-a-service segment, meanwhile, generated $1.7 billion of ACV, up 5 percent year-on-year, but down 6 percent against a record-setting third quarter.

Full-year combined ACV was a record $19.0 billion, up 10 percent. Both the managed services ($11.9 billion, up 8 percent) and as-a-service (a record $7.1 billion, up 13 percent) segments contributed to the region’s best-ever result. For the year, managed services in the UK rose 15 percent, while DACH slumped 11 percent, despite a strong fourth quarter.

Asia Pacific

The Asia Pacific region, buffeted by uncertainty over China trade and civil unrest in Hong Kong, grew 2 percent in the fourth quarter, to $2.05 billion of combined market ACV, a result that was 4 percent lower than the third quarter. Managed services slumped 41 percent, to $413 million, as most countries showed declines, with the exception of China, which saw a brief surge. The as-a-service segment, however, rose 26 percent, to a record $1.64 billion, and accounted for a record 79 percent of the combined market for the quarter.

For the year, Asia Pacific’s combined market ACV reached a record $8.8 billion, up 20 percent, and surpassed the $8-billion mark for the first time. Managed services grew 10 percent, to $2.8 billion, its best result since 2014. As-a-service ACV rose 25 percent, to $6.04 billion—the first time the region surpassed the $6-billion mark—fueled especially by 25 percent growth in IaaS, which exceeded $5 billion in ACV for the first time.

About the ISG Index™

The ISG Index™ is recognized as the authoritative source for marketplace intelligence on the global technology and business services industry. For 69 consecutive quarters, it has detailed the latest industry data and trends for financial analysts, enterprise buyers, software and service providers, law firms, universities and the media. In 2016, the ISG Index 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 Index presentations.

The 4Q 2019 ISG Index was presented during a conference call and webcast today. To listen to an audio replay of the call and view presentation slides, visit this webpage.

For a snapshot of the 4Q 2019 ISG Index results, view this infographic.

About ISG

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 more than 70 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; 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 digital-ready professionals operating in more than 20 countries—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

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