Information Services Group (III) investor relations material

Market trends and performance

• Global technology services and software spending reached a record $32.7 billion in Q3, up 18% year-over-year, driven by AI adoption and cloud-first strategies.

• As-a-service (XaaS) market, including infrastructure and SaaS, grew nearly 30% year-to-date, with XaaS ACV up 31% year-over-year in Q3 to $21.6 billion, now representing 65% of combined market ACV.

• Managed services growth was sluggish globally, with the Americas up 15% year-to-date, while EMEA and Asia Pacific remained soft due to delayed decision-making and reduced discretionary investment.

• Deal activity rebounded, with strength in both mega deals and smaller deals ($5M–$10M ACV), signaling a return of transformation-led programs and discretionary spend.

• AI adoption is accelerating, delivering over 30% efficiency gains in software engineering and customer support, but disrupting traditional BPO volumes.

Regional and sector insights

• Americas led managed services growth, up 15% year-to-date, driven by financial services, ITO, and engineering, while EMEA and Asia Pacific saw declines due to macroeconomic and geopolitical factors.

• In EMEA, energy costs, tariffs, and political tensions delayed decision-making, with managed services ACV down 25% year-over-year; Nordics and Southern Europe showed some growth.

• Asia-Pacific managed services ACV was down 26% year-to-date, with India as a positive outlier, up 5%.

• BFSI sector is recovering, up 8% year-to-date, with Americas up over 30% and EMEA down 12%. Energy sector had its best quarter ever, up 23% year-to-date.

• Retail and CPG sectors remain weak, down 18% year-to-date, especially in EMEA.

Service line updates

• ITO segment was down 2% year-on-year in Q3 but up 5% year-to-date, with the Americas driving all growth (up 25%).

• Engineering services surged, up nearly 60% year-over-year in Q3 and 36% year-to-date, with large providers winning nearly half of awards.

• BPO segment ACV was down 16% year-on-year in Q3 and 22% year-to-date, showing long-term decline, but saw sequential stabilization.

• BPO providers are shifting to technology-led solutions, focusing on AI, data science, and platform engineering skills, with M&A activity enhancing these capabilities.

• SaaS ACV up 18% year-over-year in Q3 and 16% year-to-date, with top 10 providers outperforming the broader index.