Quarterly technology spends breach $19-billion mark: ISG
The ISG Index counts the value of commercial outsourcing contracts that are more than $5 million in ACV.
Global demand for technology and business services reached a new record of $19.1 billion annual contract value (ACV) in the quarter-ended June 2021, according to a report from global technology research and advisory firm Information Services Group (ISG).
The ISG Index counts the value of commercial outsourcing contracts (that are more than $5 million in ACV) to give an overview of the worldwide IT market each quarter.
The ACV for the global market rose 32 percent in the quarter ending June 2021 over a “soft quarter” last year when the demand was dull due to the pandemic. It was also a 11.7 percent increase over the $17.1 billion ACV in the quarter ending March 2021.
Steve Hall, Partner and President of ISG, said the rise in the June 2021 quarter was driven by two trends—the move to the cloud, and digital transformation. “COVID accelerated those moves by three to five years,” he added.
The managed services market, which includes information technology and business process outsourcing (BPO) services, has recovered from the COVID-19 dip between April and June 2020.
“The recovery looks strong and sustainable,” said Hall during a webinar to discuss the global trends in enterprise technology. Last year, companies renegotiated the backlog of deals at decreased rates, Hall noted. These deals are now being “competitively bid in a race to return to normal.”
Indian companies, such as Tata Consultancy Services(TCS), Infosys, HCL Technologies and Wipro, compete in the managed services market.
In the BPO segment, the ACV grew 48 percent in the first half of 2021 to reach $3.3 billion compared to the same period last year. However, the ACV is still lower than pre-pandemic levels.
Other business requirements in IT deals
Another defining trend in the way enterprises bought IT is not focusing entirely on cost, but other business requirements.
The lowest bids won only 40 percent of the time based on the data collected by ISG between 2015 and 2020, said Stanton Jones, Director & Principal Analyst of ISG Research.
Low prices can actually create doubts if the service provider actually understands the complexity of the environment, Jones said.
What are the enterprises focusing on, then? “Enterprises are increasingly prioritising the environmental, social and governance (ESG) criterion in their evaluations of IT service providers,” Jones said.
This includes the diversity of the sales or delivery team, or the corporate governance practices of IT providers, or the commitment to the environment, to reduce risks, he added.
As enterprises digitise, they are spending more on cybersecurity.
Global security spending of the Fortune 500 companies for each user rose 42 percent in 2020 to $659, according to ISG Inform 2021.
Another pull factor has been the shift to cloud services.
Almost all companies are switching from traditional data centers to cloud solutions in some capacity. There are no surprises there.
With Amazon, Microsoft, Google and Alibaba competing in the top league to provide cloud solutions, infrastructure-as-a-service (IaaS) soared 41 percent from last year to reach $8.2 billion.
The world’s biggest technology giants are at each other's throats to grab the cloud-based as-a-service market. Iaas, along with the software-as-a-service market, crossed $11 billion for the first time in the June quarter.
Cloud is still between 10 percent and 15 percent of the global IT business, according to ISG. In the years, even as growth remains healthy, “inflationary pressures, increased regulations, scrutiny and taxation” may cause some problems.
Edited by Kunal Talgeri