Managed services reach $10Bn amid cloud spending dip, says ISG
CONNECTICUT, UNITED STATES — Managed services reached a record US$10 billion in the second quarter of 2023, despite a dip in the overall IT and business services market caused by reduced cloud service spending.
According to a report from the Information Services Group (ISG), this growth reflects a six per cent increase compared to the same period last year.
ISG President Stevel Hall explained that demand in the managed services segment remains strong as enterprises use it as a “lever for cost optimization.”
Contract renewals and extensions remain robust, and mega-deal ACV also came in very strong for the quarter,” he added.
In Q2, 10 mega-deals worth a combined US$1.7 billion of annual contract value (ACV) were signed, representing a 35% increase compared to Q2 of the previous year.
However, the ISG Index also recorded a total of US$22.7 billion ACV in Q2, down nine per cent year-on-year (YoY).
The drop in the overall market is attributed to slowing demand for cloud-based services, falling by 18% to $12.6 billion. First-half results showed a 9.5% decrease in combined market ACV over the prior year.
Considering these trends, ISG lowered its forecast for XaaS revenue growth in 2023 to 11.5% while maintaining its growth forecast for managed services at five per cent.
“In determining our forecast, we considered macro uncertainties that have delayed decision-making and tightened discretionary spending, thus slowing movement in the pipeline,” Hall stated, adding that enterprises continue to be more cautious about their investments this year.
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