Managed Services Demand Peaks While Cloud Spending Slumps, Says ISG

Information Services Group, or ISG, released data on managed services.   Global demand for managed services peaked in the second quarter, even as lower spending on cloud services pulled down the overall IT and business services market.   Data from the ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, show that second-quarter ACV for the combined global market – both cloud-based as-a-service (XaaS) and managed services – was $22.7 billion, down 9 percent from the prior year – the third straight quarter the market has seen a year-over-year decline.

Managed services hit a new quarterly high of $10.0 billion, up 6 percent from the prior year – the tenth time this segment has grown year-over-year in the last 11 quarters. Yet the overall market was down as slowing demand for cloud-based services accelerated.

SMB Group published more data on the view of the adoption of Cloud/SaaS Solutions for future financial applications.  In the SMB, it’s 70% are extremely likely or likely.       And interestingly, that number increases with the size of the organization.   In those between one thousand and 2500 employees, it’s 77%.    That fifty to ninety-nine range is dead on 70%.

There is a growing demand for managed services. This could indicate a shift in priorities or strategies among businesses, possibly toward maintaining and improving existing infrastructures and systems instead of investing in new cloud-based solutions.    The takeaway is to maintain existing versus new investments based on market uncertainty.    And as we established over this week, that will be less of a limiting factor as sentiment is shifting positively.    Then the bad times.. were pretty good.