Demand for traditional managed services in APAC remained strong in the second quarter, even as spending on cloud services continued to slide, according to the latest state-of-the-industry report from Information Services Group ISG.
The Asia Pacific ISG Index, measuring commercial outsourcing contracts with annual contract value (ACV) of US $5 million or more, shows second-quarter ACV for the combined market – both cloud-based XaaS and managed services – fell 18% versus the prior year, to US $4.0 billion, dragged down by a sharp and continuing decline in the XaaS segment.
ACV for XaaS was down 28% percent for the quarter to US $2.9 billion, the lowest such mark since the third quarter of 2020 and the fourth quarter in a row that the XaaS market has contracted year over year.
Demand for managed services rose significantly, with second-quarter ACV up 30% to US $1.1 billion, from the prior year.
“Enterprises in Asia Pacific are increasing their spending on traditional IT and business services outsourcing as a lever for cost optimization in an uncertain economy,” said Scott Bertsch, partner and regional leader, ISG Asia Pacific
“The cloud sector, meanwhile, continues to suffer a reversal of fortune. Enterprises that scaled up quickly during the pandemic are now rationalizing their cloud costs and postponing discretionary cloud spending.”
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