The IT outsourcing business is booming as the world emerges from the pandemic, with cloud-based services leading the charge.
Tech research and advisory company ISG recently published a new report that states that, in the third quarter of 2021, businesses spent $21.8 billion on IT and related business services. Of that figure, $13.4 billion (61 percent) was spent on cloud-as-a-service contracts, up 55 percent compared to the same period last year.
But it’s not just cloud-related work that’s on the rise; the total value of managed service contracts is also up 40 percent, hitting 8.4 billion.
According to Steve Hall ISG President, this surge is about more than just post-Covid recovery, it’s a “real structural shift” for the market. Enterprises are accelerating their digital transformation strategies, modernizing their legacy environments and increasingly shifting to the cloud.
“We see this trend continuing for the foreseeable future, even against some economic headwinds. There is no let-up in sight,” he said.
Breaking down the different cloud categories, the report states that spending on cloud-as-a-service solutions hit $3.3 billion, up 59 percent year-on-year, while IaaS contracts totaled $2.4 billion and SaaS contracts hit $930 million.
For the entire year, ISG believes IaaS and SaaS contracts will be worth a quarter more, compared to 2020, and it expects managed services to rise by 10 percent.
“Our outlook for the technology and business services market remains bullish, with the volume of managed services deals in the pipeline indicating strong buying intentions among enterprises seeking digital transformation partners,” Hall continued. “The market is no longer dependent on larger deals and the smaller deals, we believe, will eventually grow into larger engagements as transformation efforts continue to pick up steam.”
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