ISG Index™: Asia Pacific Outsourcing Accelerates, up 44% in Second Quarter

Region's second-quarter As-a-Service ACV rises 18 percent over previous record high

Traditional sourcing marks its best quarterly result in four years

SYDNEY,Aug. 3,2018 --Demand for technology and business services continues to accelerate in Asia Pacific,with as-a-service contract value climbing to another record high in the second quarter and traditional sourcing value reaching its highest level in four years,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 US$5 million or more,reveal second-quarter combined ACV in Asia Pacific reached US$1.9 billion,up 44 percent versus the prior year. Although the smallest regional sourcing market,Asia Pacific's growth rate outstrips that of both the Americas and EMEA regions,which posted growth rates of 33 percent and 23 percent,respectively.

Traditional sourcing in Asia Pacific was up 25 percent for the quarter,to US$864 million,despite the number of awards dipping 8 percent compared with the prior year. As-a-service sourcing reached US$1.07 billion,a record high and up 65 percent year on year.

"Demand for outsourced IT and business services continues to expand across Asia Pacific,helped by robustgrowth in ANZ and the North Asia countries,and a strong focus on all things digital," said Lisa Borden,partner and head of ISG Australia and New Zealand (ANZ). "Asia Pacific has embraced cloud-based as-a-service solutions more quickly than other regions. Indeed,over the last three quarters,as-a-service ACV has far exceeded that of traditional sourcing – the only region where this is the case. That doesn't mean traditional sourcing is on the decline; far from it: Asia Pacific recorded its best quarter for traditional sourcing since the second quarter of 2014. Overall,the combined market for sourcing services here is quite robust."

Globally,second-quarter ACV for the combined market advanced 31 percent to a record US$12.4 billion. Traditional sourcing ACV reached US$7 billion,up 19 percent,and as-a-service ACV climbed 51 percent,to US$5.4 billion. ACV in the as-a-service space has almost doubled in the last two years,powered by new highs in both Software-as-a-Service (SaaS) and Infrastructure-as-a Service (IaaS).

For the half year,combined market ACV in Asia Pacific reached a high of US$3.3 billion,up 45 percent over 2017's previous record. Traditional sourcing values grew 27 percent,to US$1.3 billion,while as-a-service continued its stellar growth,up 60 percent to US$1.97 billion. Both the IaaS and SaaS segments turned in robust results,with IaaS almost tripling its ACV in the last two years and SaaS posting growth of 29 percent.

By industry,all sectors in the region posted ACV gains in as-a-service sourcing but showed mixed results for traditional sourcing. Financial Services,Manufacturing and Business Services were the biggest spenders in as-a-service contracting. The largest gains were seen in the Business Services sector,where as-a-service ACV of US$863 million was up 86 percent year on year.

About the ISG Index™

Now in its 63rd consecutive quarter,the ISG Index™ provides a quarterly review of the latest sourcing industry data and trends for clients,providers,analysts and the media. For more than 15 years,it has been the authoritative source for marketplace intelligence related to outsourcing transaction structures and terms,industry adoption,geographic prevalence and service provider performance. 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.

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 75 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; technology 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 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 www.isg-one.com.