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Americas Market for IT and Business Services Down 7% in Q1, ISG Index™ Shows


Managed services down 1% in Q1, while cloud-based XaaS down 11% vs. prior year

Managed services improvement seen vs. Q4, with ACV up 12%, deal volume up 6%

Demand for IT and business services in the Americas declined 7 percent in the first quarter versus the prior year, but was up slightly from the fourth quarter, according to the latest state-of-the-industry report from Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The Americas ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, shows first-quarter ACV for the combined market—including both as-a-service (XaaS) and managed services—at $12.5 billion, down 7 percent, the steepest year-over-year drop for the region since ISG began tracking the combined market in 2015. Sequentially, the Americas combined market was up 0.3 percent, ending a string of three straight quarters of declining results since the market peaked in the first quarter of 2022.

“Enterprise spending on outsourcing rebounded somewhat in the first quarter from Q4 but remains below its post-pandemic peak in Q1 last year, as companies focus on optimizing their current environments,” said Todd Lavieri, ISG vice chairman and president of ISG Americas and Asia Pacific. “We saw six mega-deals—those valued at $100 million or more annually—in the first quarter and the beginnings of what may be a rebound in 2023.”

Managed services ACV declined 1 percent versus the prior year, but was up 12 percent against the fourth quarter, to $5.2 billion. A total of 354 managed services contracts were signed during the quarter, down 9 percent from the market peak in the first quarter last year, but up 6 percent from the fourth quarter.

The Americas saw its the second-highest deal volume ever in Q1. Market activity was driven by restructured contracts (renewals and extensions), which made up more than $2 billion in ACV, and new scope awards, at more than $3 billion. “The volume and value of new scope awards is an indication that continuous digital transformation remains alive and well,” Lavieri said. “Companies must continue to advance the ball when it comes to customer experience and operational efficiency.”

Within managed services, IT outsourcing, at $3.2 billion of ACV, was flat with the prior year, but up 2 percent versus the fourth quarter, while business process outsourcing, at $2.1 billion, was down 3 percent from the prior year but up 32 percent over the fourth quarter, driven by growth in engineering, research and development and human capital management services.

Demand for cloud-based XaaS solutions, at $7.3 billion of ACV, declined 11 percent from the prior year, its sharpest quarterly drop ever, and 7 percent versus the fourth quarter. The market has declined sequentially for four straight quarters, and the rate of decline is accelerating, as clients focus on optimizing their existing cloud environments rather than add new workloads.

Cloud-based infrastructure-as-a-service declined 14 percent versus the prior year, to $4.9 billion, while software-as-a-service dropped 6 percent, to $2.4 billion.

2023 Global Forecast

ISG lowered its forecast for global XaaS growth in 2023 to 15 percent, down 200 basis points from its January forecast, and maintained its global growth forecast for managed services at 5 percent.

“The macro-economic environment remains uncertain, with interest rates, inflation and trouble in the banking sector topping concerns for enterprise clients,” said Lavieri. “There continues to be more scrutiny on deal signings to ensure price and value are at market levels, and discretionary spending is down. Enterprises are revisiting cost optimization, efficiency gains and vendor consolidation.”

ISG said industry attrition has stabilized and the firm expects hiring to improve in the back half of the year. The decline in XaaS bookings is expected to last through the second quarter, with demand picking up again in the second half, ISG said.

About the ISG Index™

The ISG Index™ is recognized as the authoritative source for marketplace intelligence on the global technology and business services industry. For 82 consecutive quarters, it has detailed the latest industry data and trends for financial analysts, enterprise buyers, software and service providers, law firms, universities and the media. For more information about the ISG Index, visit this webpage.

About ISG

ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,600 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit

Press Contacts:
Will Thoretz, ISG
+1 203 517 3119

Julianna Sheridan, Matter Communications for ISG
+1 978-518-4520

Source: Information Services Group, Inc.
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