Global Market for IT and Business Services Grew at Fastest Pace Ever in 2021 — ISG

By Adriaan Brits | Friday, January 14, 2022 | Tech, Business

The latest industry report from Information Services Group (ISG) shows that the global market for IT and business services grew 29%, the highest annual growth rate on record.

An IT engineer working in a server room.

Record Year on Many Different Fronts

According to the ISG Index, the amount of commercial outsourcing contracts with an annual contract value (ACV) of over $5 million rose to $84.2 billion in 2021. The growth rate of 29% marks the highest number since ISG began tracking as-a-service (XaaS) spending in 2014.

The report also showed that the global market for IT and business services did experience a slowdown in Q4 compared to other quarters. In that quarter, the growth rate slowed to just over 1% when compared to a prior quarter.

“Even with the headwinds of the ongoing pandemic, inflation, supply chain disruptions and the Great Resignation, ISG still forecasts healthy growth rates for both managed services and XaaS in 2022,” said Steve Hall, president of ISG.

“Many large enterprises are in the early stages of their digital and cloud journeys and are looking to invest further in transformation. As the role of technology morphs from cost savings to revenue generation, technology adoption will only increase over time. That market-driver will more than offset the current market challenges,” added Hall.

The total XaaS market soared 38% to $51.3 billion in 2021, led by robust growth experienced by the infrastructure-as-a-service (IaaS) business sector that jumped 40% to $38 billion. IaaS was followed by software-as-a-service (SaaS) that rose 31% to a fresh record of $13.3 billion.

For Q4, the XaaS market jumped 47% to $14.3 billion. IaaS advanced 46% to $10.7 billion while SaaS rose 50%, also to a new record of $3.7 billion.

When it comes to managed services, they also advanced to a new record ACV high of $33 billion, marking a growth rate of 16% compared to the same period a year ago. The sector also saw the number of contracts exceed 2,000 in a single year.

IT outsourcing jumped 12.5% to $25.1 billion, another new record, on the back of 1,560 contracts. Similarly, the application development and maintenance (ADM) market saw its ACV jump 40% to $14.3 billion.

Business process outsourcing (BPO) also rose at a strong pace (31%), but not enough to post a new record year. For this segment, ACV hit $7.8 billion on a record 616 contracts. Strong performance was led by engineering and R&D services that exploded 170% to $1.8 billion in 2021.

When it comes to what we can expect from this business market in 2022, ISG sees both IaaS and SaaS growing 20%, while the global market for managed services is estimated to advance by 5.1%.

“Inflation and heightened regulatory pressures create a less-than-ideal environment for XaaS going forward, and that will lead to a series of fits and starts on a quarterly basis throughout 2022,” said Hall.

Summary

ISG’s latest report on the global market for IT and business services shows an advance of 29% in 2021 to a new record of $84.2 billion.


About the Author

Headshot of Adriaan Brits

An analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in advanced analytics and media.

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