Americas IT and Business Services Industry Sees Continuing Decline in Q1

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By industry, ACV in the banking, financial services and insurance (BFSI) sector was down 18 percent, accounting for more than 70 percent of the region’s decline in overall managed services ACV this quarter. Other large industries fared better, with ACV in healthcare/pharmaceuticals and manufacturing both gaining more than 2 percent in the quarter. Other industries, such as energy and travel, transport and leisure, saw double-digit increases in ACV, although off smaller bases.

Within managed services, IT Outsourcing (ITO) ACV rose 1 percent, to $3.4 billion, driven by strong growth in bundled infrastructure and application development and maintenance (ADM) services, offset by sharp declines in areas such as data center and end user computing services. Business processing outsourcing (BPO) ACV, meanwhile, fell 22 percent, to $1.7 billion. Contact center and industry-specific services were off sharply, partially offset by growth in finance and accounting (FAO), engineering and supply chain services.

ACV for XaaS was up 1 percent, to $7.1 billion, breaking a four-quarter string of declining year-over-year results to reach an ACV total not seen since the fourth quarter of 2022. It was also the second straight quarter this segment saw sequentially improving results.

Within this segment, ACV for infrastructure-as-a-service (IaaS) was up 2 percent versus the prior year, to $4.6 billion, while software-as-a-service (SaaS) was flat, at $2.5 billion.

2024 Global Forecast

ISG is forecasting 3 percent growth for managed services, down 125 basis points from its January forecast, and maintaining its forecast of 15 percent revenue growth for XaaS in 2024.

“Looking ahead to the rest of the year, economic conditions are forecasted to be less volatile than in 2023, but challenges persist,” Lavieri said. “Clients remain focused on quality of service, innovative customer experiences, IT security and costs. Global competitiveness continues to be a challenge especially in an environment where interest rates remain elevated from the previous cycle.

“Outsourcing could see a boost as companies seek to balance cost management and service quality. GenAI, meanwhile, is poised to be a growth catalyst, with large hyperscalers expected to manage increasing workloads. The data layer, integral for training AI models, presents a prime opportunity for service providers.”

About the ISG Index

The ISG Index is recognized as the authoritative source for marketplace intelligence on the global technology and business services industry. For 86 consecutive quarters, it has detailed the latest industry data and trends for financial analysts, enterprise buyers, software and service providers, law firms, universities and the media.