Combined market climbs 27 percent, to record $41.7 billion, in 2021

Q4 slowdown attributed to weaker quarter-over-quarter managed services results

The market for IT and business services in the Americas hit a record high in 2021, although demand flattened out sequentially 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.

The Americas ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, shows full-year ACV for the combined market—including both as-a-service (XaaS) and managed services—reached a record $41.7 billion, up 27 percent, the region’s best annual growth rate since ISG began tracking the combined market in 2014.

Combined market ACV in the fourth quarter, at $11.5 billion, was 52 percent higher than the Covid-weakened prior-year period, but down slightly from the record $11.6 billion the region posted in the third quarter of 2021. It was the first quarter-over-quarter decline the region experienced in 2021.

“Enterprises in the Americas region, the largest sourcing market in the world, continue to accelerate their migration to the cloud as they seek improved customer experiences, cost savings, more agility and faster growth,” said Todd Lavieri, vice chairman and president of ISG Americas and Asia Pacific. “Although managed services growth slowed sequentially in the fourth quarter, we continue to see a robust market for the technology and services that, ultimately, will make every enterprise a digital one. The outlook for this year looks very bright, on top of the record growth of 2021.”

Full-Year Results by Segment

The Americas XaaS market jumped 32 percent, to a record $25.5 billion in 2021. Infrastructure-as-a-service (IaaS) shot up 34 percent, to a record $17 billion, while software-as-a-service (SaaS) advanced 29 percent, to a record $8.5 billion.

Managed services for the full year reached a record $16.2 million, up 19 percent, with the number of contract awards exceeding 1,000 for the first time ever. The 1,076 contracts signed during the year included 10 mega-deals (contracts worth more than $100 million annually), with overall volume up 19 percent versus the prior year. IT outsourcing (ITO) hit a record $11.5 billion of ACV, up 18 percent, while business process outsourcing (BPO) topped $4 billion for the first time, at $4.6 billion, up 22 percent year over year.

Fourth-Quarter Results by Segment

The Americas XaaS market soared 53 percent, to a record $7.3 billion, in the fourth quarter. IaaS jumped 57 percent, to a record $5.0 billion, while SaaS climbed 46 percent, to a record $2.3 billion.

Managed services ACV advanced 49 percent, to $4.2 billion against a soft year-ago quarter, but was down 10 percent sequentially from the third quarter of 2021. A similar pattern was evident for both the ITO and BPO segments. ITO was up 73 percent over the prior year, to $3.0 billion, but down 10 percent sequentially, while BPO was up 10 percent year over year, to $1.2 billion, but down 9 percent sequentially. A total of 267 managed services contracts were awarded in the quarter, up 10 percent versus the prior year but down 8 percent from the third quarter of 2021.

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.

About the ISG Index™

The ISG Index™ is recognized as the authoritative source for marketplace intelligence on the global technology and business services industry. For 77 consecutive quarters, it has detailed the latest industry data and trends for financial analysts, enterprise buyers, software and service providers, law firms, universities and the media. 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.

For more information about the ISG Index, visit this webpage.

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 more than 75 of the world’s top 100 enterprises, 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; 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 digital-ready 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.

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