Q1 Shows Continued Decline in Americas IT and Business Services Industry: ISG Index

The Americas market for IT and business services experienced a 3% decline in the first quarter of 2024, with managed services dropping by 8% while XaaS (cloud-based as-a-service) saw a 1% increase. The decline in managed services was primarily driven by the banking, financial services, and insurance (BFSI) sector, which accounted for more than 70% of the overall decline in managed services ACV.

According to the latest report from Information Services Group (ISG), the Americas ISG Index™ revealed that the combined market, including both managed services and XaaS, had an ACV of $12.1 billion in the first quarter, down 3% from the previous year. Despite the decline, the rate of decrease in Q1 was slower compared to the average decline over the last five quarters.

Todd Lavieri, vice chairman and president of ISG Americas and Asia Pacific, noted that economic and geopolitical concerns have continued to impact the region, leading to a market downturn that began in early 2022. However, Lavieri expressed cautious optimism for the rest of 2024, expecting companies to increase their spending on IT and business services later in the year.

The report also highlighted that within managed services, IT Outsourcing (ITO) ACV rose by 1%, driven by growth in bundled infrastructure and application development and maintenance services. On the other hand, Business Processing Outsourcing (BPO) ACV fell by 22%, with contact center and industry-specific services experiencing sharp declines.

Overall, ISG is forecasting a 3% growth for managed services and maintaining a 15% revenue growth forecast for XaaS in 2024. Despite ongoing challenges, including economic volatility and global competitiveness, the report suggests that outsourcing could see a boost as companies seek to balance cost management and service quality in the coming months.