Information Services Group (III) Status Update summary

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, with five consecutive quarters of double-digit growth.

• As-a-service (XaaS) market grew nearly 31% year-over-year in Q3 and 32% year-to-date, now representing 65% of combined market ACV, with IaaS up 35% and SaaS up 18%.

• Managed services growth was sluggish overall, down 2% year-over-year in Q3, but robust in the Americas, up 15–22% year-to-date, while EMEA and Asia Pacific saw declines.

• Deal activity is rebounding, with both mega deals and smaller discretionary deals increasing, particularly in the Americas, signaling a return of transformation-led programs.

• EMEA and Asia remain soft due to delayed decision-making, geopolitical tensions, and reduced discretionary investment, while the Americas show signs of expansion despite macro uncertainty.

Segment and regional highlights

• ITO segment was down 2% year-over-year in Q3 but up 5% year-to-date, with the Americas driving all growth (up 25%), while EMEA declined 11%.

• Engineering/ER&D services surged 59% year-over-year in Q3 and 36% year-to-date, with large providers winning nearly half of the awards.

• BPO segment declined 16% year-over-year in Q3 and 22% year-to-date, with broad-based weakness and a shift toward technology-led solutions and specialized hiring.

• Managed services ACV in EMEA fell 25% year-over-year, with major markets like DACH, France, and the UK all down, while the Nordics and Southern Europe saw growth.

• Asia-Pacific managed services ACV dropped 26% year-to-date, with India as a bright spot, up 5%.

Policy and pricing impacts

• The new $100,000 H-1B visa fee is reshaping labor-based delivery, pushing firms toward automation, local hiring, and diversified talent models, with long-term impacts on sourcing costs and talent strategies.

• Prevailing wage requirements could further raise costs for senior visa hires, impacting margins and delivery models.

• AI-driven productivity is accelerating price declines in IT and ADM, with new autonomous level pricing models emerging to align automation levels with enterprise goals and regulatory needs.