Asia Pacific IT, business services spending drop in Q3

SYDNEY, AUSTRALIA — Information technology and business services spending in Asia Pacific fell sharply in the third quarter of 2023, according to research firm Information Services Group (ISG).

The Asia Pacific ISG Index, which measures commercial outsourcing contracts worth $5 million or more, showed spending was down 10% compared to a year earlier. 

Specifically, managed services spending dropped by 13% to US$651 million, cloud-based XaaS spending declined nine per cent to US$3.4 billion 9%, and IT outsourcing also fell nine per cent to US$502 million for the quarter.

ISG Partner and Asia Pacific Regional Leader Scott Bertsch said the decline “represents a pause for the market” after a strong 2022. 

“Managed services has been running hot in the region over the past year, so this quarter’s decline represents a pause for the market. XaaS, although still down, looks like it may have bottomed out and is likely to register year-over-year growth in the fourth quarter on a favorable comparison with last year,” he stated.

Meanwhile, for the first nine months of 2023, Asia Pacific’s combined IT services market dropped 13%, its first decline since 2016. Managed services rose 25% to US$2.6 billion, but XaaS fell 19% to US$10.3 billion.

ISG raised its global forecast slightly for managed services growth in 2023 but predicts continued economic uncertainty will dampen enterprise demand in the near term. 

However, it expects spending on cloud services and AI applications to increase next year as companies continue their digital transformations.