The global market for technology and business services grew at its fastest pace ever, soaring to record heights in 2021, even as growth slowed in the fourth quarter, according to the latest state-of-the industry report from Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.
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Data from the ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, show full-year ACV for the combined global market (both as-a-service and managed services) grew by 29 percent, to $84.2 billion—the highest annual growth rate and the greatest level of ACV for the combined market since ISG began tracking as-a-service (XaaS) spending in 2014.
The fourth quarter, however, showed signs of a slowdown compared with the prior quarter. While the combined market, at a record $22.9 billion, was up 32 percent over the Covid-impacted 2020 fourth quarter, growth slowed to just over 1 percent versus the third quarter of 2021.
“Even with the headwinds of the ongoing pandemic, inflation, supply chain disruptions and the Great Resignation, ISG still forecasts healthy growth rates for both managed services and XaaS in 2022,” said Steve Hall, president of ISG. “Many large enterprises are in the early stages of their digital and cloud journeys and are looking to invest further in transformation. As the role of technology morphs from cost savings to revenue generation, technology adoption will only increase over time. That market-driver will more than offset the current market challenges.”
The global XaaS market climbed 38 percent, to a record $51.3 billion, in 2021. Within the XaaS segment, infrastructure-as-a-service (IaaS) jumped 40 percent, to a record $38 billion, its best growth rate since 2018. Software-as-a-service (SaaS), advanced 31 percent—its best annual growth rate ever—to a record $13.3 billion.
The managed services segment also hit a new annual ACV record of $33 billion, up 16 percent versus the prior year, on a record 2,176 contracts, up 15 percent. It was the first time contracting activity surpassed 2,000 deals in a year. Within managed services, IT outsourcing (ITO) grew 12.5 percent, to $25.1 billion, a new record, on record volume of 1,560 contracts, up 9 percent. Application development and maintenance (ADM) services led the way, up 40 percent, to a record $14.3 billion, even as infrastructure services declined 11 percent, to $10.8 billion.