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ISG Index(TM): As-a-Service Sourcing Outpaces Traditional Sourcing in Asia Pacific

2017-02-01 08:55
-Fourth-quarter combined ACV of US$1.1 billion up 15 percent
-Increased As-a-Service activity lifts full-year ACV for the region by 16 percent

SYDNEY, Feb. 1, 2017 /PRNewswire/ -- The Asia Pacific sourcing industry registered steady growth in 2016, driven by the region's increasing demand for digital solutions, according to the findings of the fourth-quarter and full-year 2016 Asia Pacific ISG Index™ released today by Information Services Group (ISG) (NASDAQ: III), a leading global technology research and advisory firm.

The Asia Pacific ISG Index™, which measures commercial outsourcing contracts with an ACV (annual contract value) of US$5 million or more, shows that combined ACV in the Asia Pacific region reached US$1.1 billion in the fourth quarter, up 15 percent. It was the sixth straight quarter the region generated US$1 billion or more in ACV. While traditional sourcing ACV sunk to a five-year low in the quarter, as-a-service ACV climbed to US$728 million, up 55 percent over the previous year. 

For the year, combined ACV in the region climbed 16 percent over 2015 totals, thanks to a surge in as-a-service activity that offset a 10-year low point in traditional sourcing. As-a-service ACV soared more than 50 percent above its prior-year performance and now accounts for more than half of the Asia Pacific market. This growth was boosted considerably by an increased appetite for Infrastructure-as-a-Service (IaaS), which grew 64 percent, reaching US$1.8 billion in ACV. By contrast, the region's ITO market ACV declined 13 percent year on year to US$1.4 billion, while BPO values remained steady.

Globally, 2016 combined ACV climbed 9 percent to reach US$37.4 billion, again driven by accelerated growth in as-a-service contracting, which finished the year up 38 percent compared with 2015.  

By sub-region, the Australia/New Zealand (ANZ) market saw ACV rally in 2016, up 29 percent due to several large contract signings. The number of contract signings in ANZ however fell almost 20 percent year on year. South East Asia and South Korea, though much smaller markets, also saw ACV increase in 2016. Other sub-regions, including India, Japan and China, all showed steep drops in both outsourcing activity and value for the year.  

By sector, Telecom & Media ACV led the way, finishing the year 12 percent ahead of 2015 totals, while Manufacturing leapt 60 percent compared with 2015's tepid performance. Conversely, Financial Services ACV sank to its lowest level in a decade, while the Travel and Transport sector recorded its weakest showing since 2008.

"The market migration from traditional sourcing to as-a-service sourcing in Asia Pacific is continuing to gain momentum," said John Keppel, president, ISG EMEA and Asia. "The speed of adoption of these digital opportunities in Asia Pacific is indicative of client intentions to transform their operations, enhance their engagement with customers and better leverage their connections with suppliers. Three years ago, barely one in every four dollars in Asia Pacific ACV was spent in the as-a-service space. Now as-a-service is capturing 53 percent of the total market ACV, and the pace of growth is accelerating."  

About the ISG Index™
Now in its 57th consecutive quarter, the ISG Index™ provides a quarterly review of the latest sourcing industry data and trends for clients, service providers, analysts and the media. For more than a decade, it has been the authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider performance.

About ISG
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 75 of the top 100 enterprises in the world, 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; technology 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 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 additional information, visit www.isg-one.com.

Source: Information Services Group, Inc.

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