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2Q23 INDEX PREVIEW
Demand for managed services remained strong in the second quarter. However, cloud spending continues to be under pressure as enterprises focus on cost optimization in the face of an uncertain macroeconomic picture.
Questions We’ll Address on the Call
- What’s driving the strong demand for outsourcing? We continue to see very strong demand for cost optimization – both in the awards ISG is advising and in the broader market data we’re analyzing. Within this context, extension and renewal activity continue to be very robust, and mega deal activity came in strong in the second quarter as well.
- Why does demand for cloud continue to be soft? Growth in IaaS and SaaS remains under pressure due to the macroeconomic situation. Enterprises are focused on using what they already committed to in their IaaS contracts and are delaying discretionary SaaS projects.
- What’s driving the renewed demand for captive centers? Historically, captive operations have been focused on using labor arbitrage to deliver internal support services. That’s changing. Enterprises are increasingly using captives to build internal capabilities, especially in areas like product engineering.
- How will generative AI impact the IT and business services industry? While the market is announcing dozens of new generative AI offerings, we believe the near-term impact on outsourcing agreements will primarily be improved productivity, especially in areas like application development and contact center operations.
Register for the Call
I hope you can join Steve, Kathy, Namratha and me on the 2Q23 ISG Index call next Thursday, April 13 at 9:00 AM ET, where we’ll review these key questions and discuss our forecast for the balance of the year. You can register here.