Asia Pacific Demand for Cloud Solutions Reaches Record High in Q1, ISG Index Finds

Regional market continues to be propelled by as-a-service sourcing, even as managed services slumps in response to pandemic

SYDNEY, Australia, May 14, 2020 (GLOBE NEWSWIRE) -- Asia Pacific’s demand for cloud-based as-a-service solutions soared to a new record in the first quarter, even as demand for managed services slumped in response to the coronavirus pandemic, 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 ISG Index, which measures commercial outsourcing contracts with annual contract value (ACV) of US $5 million or more, found Asia Pacific’s as-a-service market jumped 25 percent, to a record US $1.7 billion of ACV in the quarter, while managed services dropped 27 percent, to US $522 million. The two segments, combined, were up 8 percent, to US $2.2 billion. As-a-service accounted for more than 75 percent of the region’s combined market for the second consecutive quarter.

As-a-service sourcing was boosted by strong demand for Infrastructure-as-a-Service (IaaS), which climbed 32 percent, to a record US $1.5 billion, despite some pandemic-related demand constraints in China during the quarter. Demand for Software-as-a-Service (SaaS), meanwhile, softened, with ACV of US $213 million, down 8 percent off a record first quarter in 2019.

Managed services, although down compared with a robust first quarter last year, was up 26 percent sequentially from a weak 2019 fourth quarter. Within managed services, first-quarter demand was equally soft for IT outsourcing (ITO), down 27 percent, to US $438 million, and for business process outsourcing (BPO), down 26 percent, to US $84 million. Most major markets were down for the quarter, with the exception of Australia-New Zealand, which rose against a soft year-ago quarter—breaking a string of three consecutive down quarters.

“We continue to see growth in the IaaS segment as more and more enterprises shift their workloads to the public cloud, or to a hybrid cloud environment,” said Scott Bertch, partner and head of ISG Asia Pacific. “Demand for managed services, on the other hand, was softer against a robust first quarter last year, and showed signs of pandemic-related weakness.”

ANZ was a bright spot this past quarter, with ACV of US $149 million, up 33 percent, driven by solid demand from the manufacturing, consumer packaged goods and business services industries, Bertsch noted. “Thankfully, the impact of COVID-19 was more muted in ANZ compared with other parts of the world,” he said.