Hello. This is Stanton Jones and Steve Hall with a special preview of the ISG Index 3Q24 call next Tuesday, October 15, at 9:00 AM U.S. ET. Reserve your spot for the call here.
If someone forwarded you this briefing, consider subscribing here.
3Q24 Index Preview
The IT and business services industry had its best quarter ever in Q3 2024 on a return in large outsourcing awards and strong growth in Infrastructure as a Service. However, the BFSI sector remains under pressure, and generative AI use cases have yet to meaningfully scale.
Questions we’ll address on the call:
- What’s driving large deal activity? There were nine mega deals in 3Q24, putting the industry on pace to match the record-setting levels in 2023. Enterprises continue to be laser focused on cost optimization and providers are responding by shaping deals using longer-term transformation programs to help clients reach their savings goals.
- When will BFSI spending recover? The BFSI sector continues to be under pressure with annual contract value (ACV) down 11% year to date. While large banks are focused on realizing value from existing transformation programs, recent rate cuts by the U.S. Federal Reserve and the European Central Bank are upping chances of a spending recovery in 2025.
- Are cloud migrations picking back up? Infrastructure-as-a-Service ACV is up 30% Y/Y, the best result for this segment of the market since the first quarter of 2022. Nearly 40% of enterprises plan on increasing IaaS consumption in the next 12 months. We believe this is a combination of re-accelerating cloud migrations and demand for AI services.
- Is generative AI having an impact on provider growth? The number of AI-related projects reported by providers on earnings calls has increased by more than 40% on a TTM basis. For the largest providers in the industry, we’re estimating this growth translates into 5.8% of total revenue. The challenge for the IT services industry is that only 15% of GenAI use cases are fully in production today.
Register for the Call
I hope you can join Steve, Kathy, Dave and me on the call next Tuesday, October 15, at 9:00 AM U.S. ET. We’ll review these key questions and discuss our forecast for the remainder of the year and our outlook for 2025. Don’t forget to register here.
About the authors
Stanton Jones
Stanton leads ISG's Index research, helping providers, investors and ISG clients make sense of the global IT services sector. Stanton’s weekly newsletter, the Index Insider, is read by thousands of market stakeholders each week. An ISG Digital Fellow, Stanton has been quoted in Fast Company, Forbes and CIO.com, and has appeared on national cable news.
Steve Hall
As the leader of ISG’s business in EMEA and an Executive Board Member, Steve provides strategic insight and advice to help ISG’s clients solve their most critical business challenges, helping them adopt and optimize the technology and operating models they need to compete successfully. In particular, he uses his long experience and broad expertise to challenge and inspire them to think about their risks and opportunities in new and unexpected ways.
Past achievements for clients
Steve leads his team’s engagement with clients with an industry-recognized and highly valued perspective on the most important trends in business and technology. He asks and answers the big questions: Why do you need to transform? What’s your best way forward? What do you need to accelerate? And where should you invest your technology dollars to make it all happen?
Among his many client success stories, his ability to take in the big picture, define the problem and connect the dots to the right solutions helped one legacy postal and shipping giant transform itself into a modern logistics powerhouse. He also guided a global energy industry leader through a complex operating model and IT provider transition, helping them see past the obvious cost cutting measures to identify the root causes of their challenges—and delivering savings far beyond what they had imagined.
