Enterprise demand for cloud-based technology and business solutions continues to drive growth in the global sourcing market, with as-a-service contract value climbing 47 percent in the third quarter, according to the latest state-of-the-industry report from Information Services Group, a leading global technology research and advisory firm.
Data from the ISG Index, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, show third-quarter ACV for the combined global market (including both as-a-service and traditional sourcing) rose 19 percent, to $11.7 billion. All the growth was attributable to as-a-service sourcing, which reached another record high with ACV of $5.7 billion, up 47 percent. Traditional sourcing was flat for the quarter, at $6.0 billion.
The continuing surge in as-a-service value was powered this quarter by a record $4.2 billion in Infrastructure-as-a-Service (IaaS) ACV, up 53 percent. Software-as-a-Service, meanwhile, rose 34 percent, to $1.5 billion, as enterprises continue to move more workloads to the cloud.
“The combined global market pulled back a bit this period after an all-time high ACV last quarter, but growth remained robust, thanks to continued strong demand for as-a-service sourcing,” said Steve Hall, partner and president of ISG. “Digital business continues to accelerate, which is reflected in the rapid growth of cloud-based IaaS and SaaS solutions and growth in such areas as ADM, where new applications infused with analytics and AI are transforming traditional ITO.”
Year to date, IaaS ACV was up 48 percent, to $11.5 billion, as enterprises continue to modernize their infrastructure with machine learning, AI, IoT, serverless computing and data analytics. SaaS ACV was up 31 percent, to $4.4 billion, fueled in large measure by enterprises expanding platform services with existing providers.
“Moving into the final quarter of 2018, we expect IaaS growth rates for the full year to remain in the range we forecast last quarter, that is, in excess of 45 percent for public cloud and more than 30 percent for IaaS in total,” Hall said. “We’ve increased our full-year SaaS forecast to 17 percent, up a percentage point from last quarter. Traditional sourcing, for the full year, remains in the 4 percent growth range we forecasted last quarter.”
Clare Christopher is editor of SandHill.com.