Global IT services market shows signs of slowing

Spending on IT and business process services could be set to reduce over the coming months as the latest ISG figures show early signs of decline

The global IT and business processing services market has failed to grow quarter-on-quarter for the first time in six quarters, in a sign of slowing demand.

According to figures from ISG’s latest outsourcing tracker, the second quarter of 2022 saw a total of $22.8bn spent globally on IT and businesses processing services. This was 9% higher than the equivalent period last year, but a fall of 7% compared to the previous quarter.

Tech research and advisory company ISG measures IT and business process outsourcing (BPO) contracts signed for more than $5m.

The latest figures showed that spending on cloud-based as-a-service contracts reached just over $14bn, but this was 11% less than the previous quarter and represented a sudden drop compared with the previous six quarters, which on average saw 44% increases in spending compared with the previous quarter.

Of the cloud-based service spending, infrastructure-as-a-service totalled $10.2bn, down 14% on the previous quarter. Organisations invested $3.9m in software-as-a-service, a 1% reduction on the previous quarter.

Traditional outsourcing spending was $8.8bn, 2% higher than the previous quarter. 

Steve Hall, president at ISG, said the past 18 months have seen rapid take-up of OIT services, but ISG expects slower growth and more volatility over the next six months.

“We have been through an 18-month period of sustained high demand that has pushed the global market to new heights as companies accelerated their digital investments,” said Hall. “With fears of a potential recession on the horizon, we saw a slowdown in the second quarter and expect the market to be more volatile in the second half of the year.”

He said demand remains high as companies continue to embrace cloud computing and leverage technology to improve productivity, reduce costs and get closer to customers to drive revenue growth. “Yet the market faces headwinds, including rising interest rates, lingering supply chain issues, a tight labour market and higher energy prices,” he added.

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