The Asia Pacific sourcing industry registered steady growth in 2016, driven by the region's increasing demand for digital solutions, according to the findings of the fourth-quarter and full-year 2016 Asia Pacific ISG Index released by Information Services Group (ISG), a global technology research and advisory firm.
The Asia Pacific ISG Index, which measures commercial outsourcing contracts with an ACV (annual contract value) of US$5 million or more, shows that combined ACV in the Asia Pacific region reached US$1.1 billion in the fourth quarter, up 15 percent. It was the sixth straight quarter the region generated US$1 billion or more in ACV. While traditional sourcing ACV sunk to a five-year low in the quarter, as-a-service ACV climbed to US$728 million, up 55 percent over the previous year.
For the year, combined ACV in the region climbed 16 percent over 2015 totals, thanks to a surge in as-a-service activity that offset a 10-year low point in traditional sourcing.
As-a-service ACV soared more than 50 percent above its prior-year performance and now accounts for more than half of the Asia Pacific market. This growth was boosted considerably by an increased appetite for Infrastructure-as-a-Service (IaaS), which grew 64 percent, reaching US$1.8 billion in ACV.
By contrast, the region's ITO market ACV declined 13 percent year on year to US$1.4 billion, while BPO values remained steady.
Globally, 2016 combined ACV climbed 9 percent to reach US$37.4 billion, again driven by accelerated growth in as-a-service contracting, which finished the year up 38 percent compared with 2015.
By sub-region, the Australia/New Zealand (ANZ) market saw ACV rally in 2016, up 29 percent due to several large contract signings. The number of contract signings in ANZ however fell almost 20 percent year on year. South East Asia and South Korea, though much smaller markets, also saw ACV increase in 2016. Other sub-regions, including India, Japan and China, all showed steep drops in both outsourcing activity and value for the year.
By sector, Telecom & Media ACV led the way, finishing the year 12 percent ahead of 2015 totals, while Manufacturing leapt 60 percent compared with 2015's tepid performance. Conversely, Financial Services ACV sank to its lowest level in a decade, while the Travel and Transport sector recorded its weakest showing since 2008.
"The market migration from traditional sourcing to as-a-service sourcing in Asia Pacific is continuing to gain momentum," said John Keppel, president, ISG EMEA and Asia.
"The speed of adoption of these digital opportunities in Asia Pacific is indicative of client intentions to transform their operations, enhance their engagement with customers and better leverage their connections with suppliers. Three years ago, barely one in every four dollars in Asia Pacific ACV was spent in the as-a-service space. Now as-a-service is capturing 53 percent of the total market ACV, and the pace of growth is accelerating."