Asia Pacific’s IT, Business Services Market at Record High for 2021, Even with Q4 Sequential Slowdown, ISG Index Finds
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Combined market grew at fastest annual rate ever – 44 percent – to a record $16.1 billion
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Q4 slowdown due to a drop off in IaaS demand in China
The Asia Pacific ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of US $5 million or more, shows full-year ACV for the combined market—including both as-a-service (XaaS) and managed services—reached a record US $16.1 billion, up 44 percent, the region’s best annual growth rate since ISG began tracking the combined market in 2014.
For the full year, XaaS spending rose 47 percent, to a record US $13.2 billion, including 47.5 percent growth for infrastructure-as-a-service (IaaS), to US $11.7 billion, and 40 percent growth for software-as-a-service (SaaS), to US $1.5 billion, both new records.
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Managed services advanced 32 percent, to US $2.9 billion, with IT outsourcing (ITO) growing 26 percent, to US $2.3 billion, and business process outsourcing (BPO) climbing 57.5 percent, to US $628 million. The region tallied a record 213 managed services contracts in 2021, including 24 worth more than $30 million, the highest such mark since 2014.
All the major markets in the region posted managed services gains in 2021, including Japan (up 49 percent), Australia-New Zealand (up 38 percent) and China (up 30 percent).
“The market slowing on a sequential basis was mainly confined to China and in the IaaS segment. Stripping out China, IaaS was up 68 percent year over year, and 18 percent quarter over quarter.”
Fourth-Quarter Results
Combined market ACV in the fourth quarter, at $4.4 billion, was 31 percent higher than the Covid-impacted prior-year period, but rose only 1 percent sequentially from the third quarter of 2021, impacted by a slowdown in spending in the IaaS segment.
The XaaS market was up 28 percent overall, to US $3.4 billion, but was down 7 percent sequentially as IaaS slipped 8 percent quarter over quarter and SaaS declined 2 percent versus the prior period. When compared with the prior year, IaaS was up 25 percent, to US $3.0 billion, and SaaS soared 51 percent, to US $393 million.
Managed services, meanwhile, rose 43 percent versus the prior year, to US $931 million, and 50 percent versus the third quarter. ITO climbed 55 percent year over year, to US $741 million, a 70 percent increase over the third quarter of 2021. BPO was up 10 percent, to US $190 million, but only 2 percent higher than the prior quarter. There were 61 managed services contracts awarded in the fourth quarter, up 15 percent from the prior year.
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“2021 was a stellar year for Asia Pacific, as enterprises across the region continued to embrace cloud computing as the backbone of digital transformation,” said Scott Bertsch, partner and regional leader, ISG Asia Pacific. “We also saw heightened demand for traditional managed services, with a record level of contracting and especially strong growth in application development and maintenance and networking services on the ITO side and facilities management and engineering/R&D services on the BPO side.”
Speaking to the region’s slow-down in the fourth quarter, Bertsch said: “The market slowing on a sequential basis was mainly confined to China and in the IaaS segment. Stripping out China, IaaS was up 68 percent year over year, and 18 percent quarter over quarter.”
2022 Global Forecast
ISG is forecasting the global market for cloud-based XaaS (IaaS and SaaS) will grow 20 percent, at the lower end of the 20 percent to 25 percent range in recent years, and the global market for managed services will advance 5.1 percent in 2022, well ahead of the 2 percent average annual growth from 2010 through 2020.
