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Global spending on IT and businesses services over the past three months was lower than the same period last year as a result of economic concerns.
Figures from tech research and advisory company ISG found that $23bn was spent during the third quarter of 2022 – 3% less than the corresponding period in 2021.
The signs were there in the second quarter of this year, when, although investment in global IT and business processing services grew year on year, the market failed to grow quarter-on-quarter for the first time in six quarters.
ISG measures IT and business process outsourcing (BPO) contracts signed for more than $5m.
“Demand remains at an all-time high, but we are seeing some pullback in spending, as enterprises delay decision-making due to concerns about the economy,” said Steve Hall, president of ISG. “Companies are still invested in ongoing digital transformation but are going slower for now.”
He said the strength of the US dollar was affecting the market, making comparisons with the previous year difficult.
“We saw a period of sustained growth from the end of 2020 through the first quarter of 2022, but [it is] much tougher now,” said Hall. “There are definitely some headwinds in the market, but we remain optimistic on the overall deal flow.”
The third quarter saw 661 traditional outsourcing contracts signed globally – the second most contracts ever signed in a quarter, which was 3% higher than the third quarter last year.
Three mega deals, worth more than $100m per year, were signed during the three-month period – the lowest number in any quarter for the past five years.
Cloud-based as-a-service spending was down for the first time since the beginning of 2015, falling by 4% to $14.1bn. ISG revealed that infrastructure-as-a-service (IaaS) spending remained roughly the same as the previous year at $10.5bn, while software-as-a-service [SaaS] spending saw a 12% decline to $3.6bn.
Spending on traditional outsourcing services, known as managed services, fell by 1% to $9bn. Within this, IT outsourcing was up by 2%, to $6.8bn, while business process outsourcing declined by 10%, to $2.3bn.
“The slowdown in XaaS [everything-as-a-service] spending comes down to weaker demand for infrastructure services provided by China’s big four hyperscalers, which have been impacted by continuing lockdowns and the stronger US dollar,” said Hall. “The big three hyperscalers in the US – Amazon Web Services, Microsoft Azure and Google Cloud – continue to carry this segment, although we’re seeing growth slow slightly there as well.”
ISG said spending remained “near all-time highs”, but Hall said there was a possibility it could slow further as companies grew more cautious about spending on big, complex implementations.
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