The Americas sourcing market reached a record high in 2020 as the pandemic accelerated enterprise demand for hyperscale computing and other cloud-based services, 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 the region delivered a record $30.4 billion of combined market ACV in 2020, up 8 percent, with cloud-based services (as-a-service) up 18.5 percent, to a record $17.9 billion, but managed services down 4 percent, to $12.5 billion.
“Cloud-based services, including infrastructure-as-a-service and software-as-a-service, continued to be in very high demand, and we see that trend continuing into 2021 as more and more businesses accelerate their digital transformations coming out of the pandemic,” said Todd Lavieri, vice chairman and president of ISG Americas and Asia Pacific.
ACV for infrastructure-as-a-service spiked nearly 25 percent in 2020, as enterprises continue to move to the public cloud. AWS, for one, made strong inroads in the media and entertainment industry with recent wins at MGM and ViacomCBS. Among other recent notable deals, PepsiCo migrated its mission-critical SAP workloads to Azure, and Tapestry migrated its SAP S/4 HANA solution to Google Cloud.
Software-as-a-service ACV also grew in 2020, up 7.5 percent, on the strength of such deals as Dell’s contract with ServiceNow for the Now Platform; SAP’s agreements with HP and Juniper Networks; Salesforce’s deal with NBCUniversal, and Oracle’s contract with Equinix to implement Oracle Fusion Cloud.
Q4 Produces Mixed Results
Coming off a record third quarter, the Americas delivered mixed results in Q4, with demand for cloud-based services reaching a new high, but managed services slumping to its worst quarterly performance in more than four years. The region generated $7.2 billion in combined-market ACV in the fourth quarter, up 4 percent over the prior year, but down 11 percent sequentially.
Managed services fell 17 percent, to $2.5 billion, with IT outsourcing (ITO) slumping 32 percent, to $1.6 billion, even as business process outsourcing (BPO) advanced 38 percent, to $858 million. It was the region’s softest quarter for managed services since the third quarter of 2016.
“We didn’t see the same level of large-deal activity in managed services during the fourth quarter as we saw in Q3,” said Lavieri. “Deal volume overall was higher for managed services, but contract values were lower.”
For the full year, ITO was down 8 percent, despite such notable deals as Accenture’s pact with Halliburton to accelerate the oil field services company’s digital supply chain transformation, and Verizon Business’ multiyear agreement with Walgreens Boots to deploy a network-as-a-service platform at Walgreens drugstores throughout the U.S.
BPO, meanwhile, advanced 7 percent in the Americas, the only region to generate BPO growth in 2020. Although Facilities Management and Contact Center services were down, Finance and Accounting (F&A) and R&D/Engineering services hit new records, the latter including L&T Technology Services’ $100 million, multiyear contract to provide engineering services to a U.S. refinery and chemical plant.
ISG is forecasting the market for cloud-based services will grow 20 percent globally in 2021, and the market for managed services will grow 3 percent.
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 73 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, visit this webpage.
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.
Will Thoretz, ISG
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Jim Baptiste, Matter Communications for ISG
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