The Americas witnessed an unprecedented surge in demand for IT and business services during the second quarter of 2024, registering a striking $15.5 billion in contract value. This growth, a remarkable 26% year-over-year increase, has been largely attributed to the rising adoption of artificial intelligence (AI), investments in cloud infrastructure, managed services, and major outsourcing agreements.
A recent report from Information Services Group (ISG), a global technology research and advisory firm, highlighted the momentum in this sector. The ISG Index tracks commercial outsourcing contracts worth $5 million or more, revealing that the combined annual contract value (ACV) for managed services and cloud-based as-a-service (XaaS) rose significantly in this period, marking the highest quarterly growth rate seen in three years.
Key highlights from the report include managed services ACV increasing to $5.9 billion—up 20% from the previous year—and cloud-based XaaS witnessing an even steeper rise of 29%, bringing its ACV to $9.6 billion. This growth is particularly driven by enterprises looking to scale their AI initiatives through cloud solutions.
The contract activity itself has also shown substantial growth, with 392 managed services contracts signed in Q2 2024, representing a 10% increase from the same period last year. Notable among these were five mega-contracts valued at over $100 million in ACV, which reflects a strong trend towards larger outsourcing deals aimed at cost reduction and innovation funding.
While there was a notable slowdown in lower-value contracts under $10 million, likely due to delays in discretionary spending, contracts focused on transformation services continued to grow robustly. Some key industry sectors reported impressive growth rates: manufacturing up 69%, travel and hospitality at 68%, and energy-related services surging by 78%. The banking, financial services, and insurance (BFSI) sector remained the largest market, growing 20%, followed by healthcare with a 33% increase.
Todd Lavieri, Vice Chairman and President for the Americas and Asia Pacific at ISG, remarked on the continuity in market acceleration despite broader economic uncertainties. Enterprises remain committed to cloud-based transformations and leveraging AI while relying on managed services for cost-efficiency and reinvestment toward innovation.
Within managed services, application development and maintenance (ADM) stood out as the chief growth area, with IT outsourcing (ITO) ACV climbing 32% to $4.6 billion. Conversely, business process outsourcing (BPO) faced challenges, declining by 20% to $920 million. On the other hand, engineering, research, and development services saw a positive shift, growing by 35% to $326 million.
For XaaS, infrastructure-as-a-service (IaaS) recorded robust growth of 39% to $7.2 billion, while software-as-a-service (SaaS) grew more modestly at 7%, reaching $2.5 billion.
As the first half of 2024 comes to a close, the combined ACV for the Americas reached $30.1 billion, reflecting a 22.5% year-over-year increase. Managed services garnered $11.3 billion from 783 deals signed, which included eight mega-deals; ITO expanded by 24% to $8.8 billion despite BPO’s decline of 29% to $1.8 billion.
Looking to the future, ISG has maintained its moderate growth forecast for managed services revenue at 1.3% for 2025, indicating a stabilizing macro environment. However, the rising adoption of AI and the insistence on digital transformation have prompted the firm to increase its growth outlook for XaaS by 300 basis points to 21%.
These trends indicate that firms across the Americas are not only embracing AI but also consolidating their vendor relationships to drive efficiencies and navigate potential economic headwinds effectively.
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