Information Services Group (III) Status update summary

Market overview and key trends

• Combined technology services and cloud market ACV reached $42.3B in Q2, up 43% YoY, marking the highest growth rate recorded and the first time surpassing $40B in a quarter.

• Growth is driven primarily by as-a-service segments (IaaS/SaaS), up 53% in H1, while managed services saw modest 2.7% growth, with ITO declining and BPO rebounding strongly.

• New scope activity in managed services hit an all-time high, signaling active portfolio reshaping, provider consolidation, and alignment with AI and modernization strategies.

• AI and automation are shifting demand away from traditional labor-intensive work toward integrated, outcome-focused, and industry-specific services.

• The market is increasingly competitive, with GCCs, internal AI teams, and specialist firms challenging traditional providers.

Regional and industry dynamics

• Americas managed services ACV declined 5.5% in H1, while EMEA rose 21% and Asia Pacific surpassed $1B for the first time in six quarters.

• EMEA's growth is fueled by new scope and consolidation, while BFSI and energy sectors improved, and manufacturing remains under pressure due to ITO and engineering weakness.

• Demand is uneven across regions and industries, with back office and industry-specific BPO showing strength, but customer experience BPO and software-heavy engineering underperforming.

Deal structures and provider strategies

• Enterprises are consolidating work with large providers for cost savings and using smaller providers for niche innovation, creating a 'dumbbell' market structure.

• Two main deal shapes are emerging: long-duration, total cost of ownership (TCO) deals for cost reduction, and shorter, internal rate of return (IRR) deals for rapid outcomes, often leveraging AI.

• Provider portfolios are being reshaped by client mandates for modernization, cost reduction, and productivity, with AI-augmented models generating new demand.