Information Services Group (III) Status Update summary

Market performance and trends

• Global IT and business services ACV reached a record $26.7 billion in Q3, up 7% quarter over quarter and 15% year over year, marking the fifth consecutive quarter of sequential growth.

• Managed services ACV hit $10.9 billion, up 5% year over year, with deal durations increasing, 690 contracts awarded, and 9 mega-deals.

• As-a-service (XaaS) ACV surged 23% to $15.8 billion, driven by strong IaaS growth of 30% year over year, while SaaS rose 5%.

• BPO within managed services rose 20% to $2.7 billion, driven by customer engagement and HR outsourcing demand.

• Year-to-date combined market ACV reached $75.7 billion, up 8.5% from the prior year, reversing last year's decline.

Regional and sector insights

• EMEA posted its best quarter ever, with ACV up 35% year over year, led by the UK and DACH; Asia Pacific saw 17% ACV growth, while the Americas declined 7% year to date.

• Financial services sector ACV fell over 10% year to date, especially in large deals and banking, impacting overall managed services growth.

• Consumer, retail, and manufacturing sectors performed well, with retail ACV up 30% and manufacturing up 11% year to date.

• The Big Three hyperscalers saw Q3 ACV up 49% year over year, nearing $9 billion, with cloud demand robust and IaaS ACV up 30%.

• SaaS market is consolidating, with top ten providers outperforming the broader market.

AI and technology adoption

• Generative AI spending is expected to increase by 50% in 2025, reaching nearly 7% of IT budgets.

• Only 15% of GenAI initiatives are in production; most are in pilot or evaluation stages due to data readiness challenges.

• Data platforms and services are emerging as a new services tower, with 50% of enterprises using providers for data management and analysis.

• AI-related revenue for service providers reached $15.2 billion, up 42% year over year, now accounting for 5% of SI revenue.

• AI is offsetting revenue gaps in traditional services, with significant contributions to year-over-year growth.