Asia Pacific IT and Business Services Market Surges Above $5 Billion, Driven by Managed Services Demand: Q2 ISG Index™ Report
The Asia Pacific IT and Business Services Market has experienced a significant boost in the second quarter of this year, driven by a strong demand for managed services. According to the latest report from Information Services Group (ISG), the region’s spending on IT and business services exceeded US $5 billion for the first time in two years.
The Asia Pacific ISG Index™ revealed that the second-quarter ACV for the combined market, including both cloud-based XaaS and managed services, increased by 8 percent compared to the previous year, reaching just over US $5.0 billion. This marks the first time in seven quarters that the market has surpassed the US $5 billion mark, with the region showing year-on-year growth for the third consecutive quarter.
The surge in the second quarter was primarily driven by a resurgence in the demand for managed services, with its ACV climbing by 32 percent year-on-year to US $1.4 billion. This represents the region’s best quarter in 12 years, with a 34 percent sequential increase compared to the first quarter of 2024.
The report also highlighted that during the quarter, 81 managed services contracts were awarded, marking a 37 percent increase year-on-year and a 23 percent increase quarter-over-quarter. The value of restructured contracts reached a record US $548 million of ACV, showing a 163 percent increase compared to the prior year.
While demand for cloud-based services grew by 1 percent to US $3.6 billion, the ACV was down by 8 percent sequentially against the first quarter of 2024. However, the XaaS segment has shown consistent growth over the past three quarters, averaging an 18 percent year-on-year increase.
Michael Gale, partner and regional leader at ISG Asia Pacific, commented on the findings, stating that the rising demand for traditional IT and business services in Asia Pacific reflects a continued focus on cost optimization in an uncertain economy. He also noted that cloud-based services are beginning to rise again as enterprises focus on data modernization for GenAI adoption at scale.
The report also highlighted that within managed services, IT outsourcing (ITO) ACV rose by 8 percent to just over US $1 billion, driven by strong demand for bundled infrastructure and application development and maintenance services. Business process outsourcing (BPO) surged by 237 percent year-on-year to US $367 million.
Geographically, South Korea, China, and Japan saw a significant increase in demand for managed services, with the latter two markets producing their best quarters ever. However, Australia/New Zealand (ANZ) experienced a 30 percent decline, while India saw a 4 percent increase.
Overall, the Asia Pacific IT and Business Services Market has shown promising growth in the second quarter, with managed services leading the way. The region’s focus on cost optimization and the resurgence of cloud-based services are key factors contributing to this positive trend.
