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Asia Pacific’s Tech Services Sector Rebounds in Q3, as AI Drives Cloud Demand, ISG Index™ Shows
Cloud spending up 14 percent while managed services ACV declines 9 percent SYDNEY--(BUSINESS WIRE)-- Enterprises in Asia Pacific continued to spend on cloud
About this update from Information Services Group, Inc.
[{"type":"text","content":"\nCloud spending up 14 percent while managed services ACV declines 9 percent\n\n\n SYDNEY--(BUSINESS WIRE)--\nEnterprises in Asia Pacific continued to spend on cloud services to support AI but pulled back on managed services in the third quarter in the face of economic uncertainty, according to the latest state-of-the-industry report from Information Services Group (ISG) (Nasdaq: III), a global AI-centered technology research and advisory firm.\n\n\nThe Asia Pacific ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of US $5 million or more, shows third-quarter ACV for the combined market (both cloud-based XaaS and managed services) was up 10 percent versus the prior year, to US $5.7 billion—the best growth quarter this year. The double-digit growth in Q3 represents a rebound from the second quarter, when the combined market was down 1 percent.\n\n\nTo scale AI across their organizations, enterprises are turning to the cloud, with as-a-service (XaaS) spending up 14 percent, to US $4.9 billion, in the third quarter. It was the fourth straight quarter the XaaS market has seen double-digit growth in Asia Pacific, with Q3’s growth rate accelerating by 110 basis points from the second quarter.\n\n\nWithin the XaaS segment, infrastructure-as-a-service (IaaS) ACV advanced 13 percent, at US $4.3 billion, while software-as-a-service (SaaS) ACV grew 18 percent, to US $563 million.\n\n\nSpending on managed services, on the other hand, was down 9 percent in the third quarter, to US $849 million. A total of 58 managed services contracts were awarded in the quarter, down 6.5 percent from the prior year, including two mega-deals valued at more than $100 million annually. However, the number of contracts in the smallest band ISG measures—US $5 million to US $10 million—advanced 39 percent, a sharp reversal from the first two quarters of 2025 when this category was down versus the prior year.\n\n\nWithin managed services, IT outsourcing (ITO) ACV fell 19 percent, to US $536 million, with the region’s largest and fastest-growing ITO area, application development and management (ADM), up less than 1 percent. Business process outsourcing (BPO) also had a weak quarter, down 63 percent, to US $55 million. Engineering, research and development (ER&D) services advanced 108 percent, to US $259 million.\n\n\nAmon...