The global market for managed IT and business services saw a 7% increase in combined market ACV, reaching $24.8 billion, marking the best quarter in two years. Cloud XaaS drove the market up by 11%, while managed services saw only a slight increase. ISG predicts that the slow growth environment will persist, lowering the 2024 forecast for managed services growth to 2% and XaaS forecast to 14%.
According to Steve Hall, president and chief AI officer of ISG, the industry is experiencing low-single-digit growth due to pressure on discretionary spending. The second quarter saw a slowdown in revenue growth and provider margins, leading to slower hiring.
The XaaS segment showed strong growth, with infrastructure-as-a-service (IaaS) ACV increasing by 15% and the Big Three hyperscalers (AWS, Microsoft Azure, Google Cloud) seeing a 31% growth in combined ACV. Software-as-a-service (SaaS) remained steady, while managed services saw a 1.2% increase in ACV.
Looking ahead, ISG forecasts a 2% revenue growth for managed services and a 14% revenue growth for XaaS for the full year. The industry continues to focus on cost optimization and AI growth, while facing challenges in the BFSI sector and overall market growth.
The ISG Index™ provides valuable insights into the global technology and business services industry, offering data and trends for various stakeholders. For more information, visit www.isg-one.com.