The global market for technology and business services grew at its fastest pace ever, soaring to record heights in 2021, even as growth slowed in the fourth quarter, according to the latest report from Information Services Group (ISG), 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 full-year ACV for the combined global market (both as-a-service and managed services) grew 29 per cent to $84.2 billion — the highest annual growth rate and the greatest level of ACV for the combined market since ISG began tracking anything-as-a-service (XaaS) spending in 2014.

The fourth quarter, however, showed signs of a slowdown compared with the previous quarter. While the combined market, at a record $22.9 billion, was up 32 per cent over the Covid-impacted 2020 fourth quarter, growth slowed to just over 1 per cent versus the third quarter of 2021.

XaaS market

The global XaaS market climbed 38 per cent to a record $51.3 billion in 2021. Within the XaaS segment, infrastructure-as-a-service (IaaS) jumped 40 per cent to a record $38 billion, its best growth rate since 2018. Software-as-a-service (SaaS), advanced 31 per cent— its best annual growth rate ever — to a record $13.3 billion.

The managed services segment also hit a new annual ACV record of $33 billion, up 16 per cent versus the prior year, on a record 2,176 contracts, up 15 per cent. It was the first time contracting activity surpassed 2,000 deals in a year.

Within managed services, IT outsourcing (ITO) grew 12.5 per cent, to $25.1 billion, a new record, on record volume of 1,560 contracts, up 9 per cent. Application development and maintenance (ADM) services led the way, up 40 per cent, to a record $14.3 billion, even as infrastructure services declined 11 per cent, to $10.8 billion.

Steady expansion

ISG is forecasting the global market for cloud-based XaaS (IaaS and SaaS) will grow 20 per cent and the global market for managed services will advance 5.1 per cent in 2022, says the report.

Salil Parekh, CEO and Managing Director, Infosys, discussing the December quarter financial results with analysts on the deals, said, “We continue to see a good large deal pipeline. We have seen a steady expansion of our clients over $50-, $100-, $200-million and so on. We have seen that expansion within clients is working very well and also our new client wins and new accounts are working well.”

According to Thierry Delaporte, CEO & Managing Director, Wipro, the company’s order book, which is the best measure of the demand environment, has grown 27 per cent on a year-to-date basis in terms of ACV.

“We have turned the engine into a way that we have a more recurring type of deals every quarter so that the mega deal comes from the top and what is comforting is that if you look at the performance itself even without megadeal with $2.85 billion of ACV, we have done 55 per cent more than what we used to do on the given quarter a year ago,” he told analysts.

In some cases, it’s large transformation deals, and also a mix of adding new clients and renewing existing business, said Stephanie Trautman, Chief growth officer, Wipro.

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