Global Sourcing Hits Quarterly Record in Q1, ISG Index™ Shows, But Momentum Slows on COVID-19 Concerns

Global combined ACV reaches record $14.8 billion, powered by 11% growth in As-a-Service; Managed Services, on pace for strong quarter, falls back to 2% growth after sluggish March; ISG expects Managed Services ACV to be down 17% sequentially in Q2 and 7% for full year as spending slows in response to COVID-19; As-a-Service growth in 2020 will be more subdued as result of pandemic

STAMFORD, Conn., April 08, 2020 (GLOBE NEWSWIRE) -- The global sourcing market in the first quarter surpassed $14 billion in value for the first time ever, but momentum slowed in March as concerns over the coronavirus pandemic impacted spending on managed 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 first-quarter ACV for the combined global market (both as-a-service and managed services) rose 7 percent, to a new quarterly high of $14.8 billion. Record ACV in the as-a-service segment, fueled by record demand for Infrastructure-as-a-Service (IaaS), propelled the global market to new heights.

As-a-service ACV reached $7.9 billion, up 11 percent, as IaaS ACV soared 18 percent, to a record $5.9 billion in the quarter. Demand was particularly strong for cloud services provided by hyperscalers such as Amazon Web Services (AWS), Microsoft Azure, Google Cloud Platform and IBM Cloud. The Software-as-a-Service (SaaS) segment, meanwhile, declined 4 percent, to $2.0 billion.

Managed services ACV rose 2 percent, to $6.8 billion, but was on pace for one of its best quarters ever until COVID-19 concerns slowed momentum in March. ISG projected managed services ACV in the quarter would have topped $7.3 billion, if not for the impact of the pandemic. Within this segment, information technology outsourcing (ITO) rose 11 percent, to $5.8 billion, while business process outsourcing (BPO) declined 30 percent, to $1.0 billion.

“We saw strong growth the first two months of the quarter, but a noticeable tail-off in March as the reality of the COVID-19 pandemic hit the market,” said Steve Hall, partner and president of ISG. “Still, quarterly ACV smashed through the previous record high of $13.8 billion in last year’s Q1, fueled in large measure by increased demand this year for hyperscale services from the big cloud providers. Managed services results won’t be nearly so rosy in the second quarter, when the full impact of the pandemic hits the global services market, but we still see some upside in IaaS spending.”


After closing 2019 on a down quarter, the Americas roared back in the first quarter with a 9 percent increase in combined market ACV, to a near-record $7.6 billion. As-a-Service ACV broke through the $4 billion mark for the first time in a quarter, to a record $4.2 billion, up 11 percent. Both IaaS, at $2.9 billion, up 17 percent, and SaaS, at $1.3 billion, up 1 percent, also were at record highs.

Managed services advanced 6 percent, to $3.4 billion, although this segment saw a big drop-off in the last two weeks of March related to COVID-19. ITO rose 11 percent, to $2.8 billion, while BPO declined 13 percent, to $624 million. The coronavirus impacted the Americas later in the quarter than other regions, resulting in relatively stronger first-quarter results.

Europe, Middle East and Africa (EMEA)

Combined market ACV in EMEA rose 4 percent, to $4.9 billion, as the region felt a late first-quarter pinch with the COVID-19 pandemic spreading from Italy to Germany, then to the U.K., Spain and the rest of the EU in March. Managed services advanced 6 percent, to $2.9 billion, led by several large managed services contracts in the DACH market, which offset weakness in the Nordics, as well as some post-Brexit sluggishness in the U.K. Within managed services, ITO surged 23 percent, to $2.6 billion, while BPO fell back 51 percent, to $314 million.

As-a-Service ACV, at $2.0 billion, established a new quarterly record, albeit on only 1 percent growth year over year. IaaS rose 7 percent, to $1.5 billion, while SaaS slid 13 percent, to $518 million.

Asia Pacific

Combined market ACV in Asia Pacific reached $2.2 billion, up 8 percent, equaling the region’s best quarter ever. Growth was powered by the as-a-service segment, which jumped 25 percent, to a record $1.7 billion, and now represents more than 75 percent of the combined market. IaaS soared 32 percent, to an all-time high of $1.5 billion, even as SaaS declined 8 percent, to $213 million.

Managed services ACV, meanwhile, slid 27 percent, to $522 million, as ITO ($438 million, down 27 percent) and BPO ($84 million, down 26 percent) fell by similar percentages. Most major markets turned in sluggish performances, with the exception of Australia-New Zealand, which broke a year-over-year slide spanning the last three quarters.


ISG said it expects managed services ACV to decline 17 percent sequentially in the second quarter as overall spending slows in response to the pandemic. For the full year, ISG projects managed services spending will be down 7 percent versus the prior year. This compares with ISG’s preliminary forecast in January of 3.2 percent annual growth for 2020.

Second-quarter as-a-service ACV is expected to be flat, quarter over quarter, with some upside potential for IaaS, ISG said. For the full year, ISG forecasts as-a-service ACV will be up 12 percent versus the prior year. This compares with ISG’s preliminary forecast in January of 23.5 percent annual growth for 2020.

ISG said it expects 60 percent of its enterprise clients will delay their planned technology spending for at least 90 days, in response to COVID-19 concerns.

“There are opportunities, though,” Hall said. “Supply chain resiliency and business-to-consumer solutions will be board-level issues by the third quarter, which will accelerate the adoption of ERP and digital solutions. We also think there is upside in the IaaS space in Q2 as enterprises reassess their fixed-asset strategies and drive more workloads to the cloud.”

Added Hall: “Poor performing captives or global innovation centers will be reassessed and likely be monetized to provide a needed cash infusion and improvement in business resiliency, which provides opportunities for service providers to expand their portfolios.”

As to the future, Hall said enterprises further along in their digital transformations “will likely weather the COVID-19 storm the best,” while those that are less digitally mature have “good reason now to accelerate their digital investments.”

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 70 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 1Q 2020 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 75 of the world’s top 100 enterprises, 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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