Index Insider: 3Q25 ISG Index Recap | ISG

Hello. This is Stanton Jones and Steve Hall with a special recap of the 3Q 2025 ISG Index Call. You can download the slides here, and watch a replay here.

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Cloud infrastructure and AI-first strategies are now central to where – and how – enterprises are investing. Spending on as-a-service has been extremely strong throughout the first three quarters of the year; managed services growth has been sluggish despite a rebound in the Americas. H-1B policy changes are adding cost and complexity to the industry and AI adoption is accelerating – and disrupting – traditional FTE-based outsourcing services.

Managed Services YTD ACV Results

• Service Lines: ITO up 5%; Engineering up 36%; BPO down 22%
• Regions: Americas up 15%; EMEA down 8%; Asia Pacific down 26%
• Industries: BFSI up 8%; Energy up 23%; CPG & Retail down 18%

As-a-service YTD ACV Results

• SaaS Regions: Americas up 13%; EMEA up 22%; Asia Pacific up 20%
• SaaS Top 10 Providers: up 17%
• IaaS Regions: Americas up 42%; EMEA up 43%; Asia Pacific up 13%
• Big 3 Hyperscalers: up 42%

2025 Outlook

Macroeconomic signals remain mixed. Tariffs, delayed decision cycles and geopolitical uncertainty – especially in Europe — are weighing on tech spending and creating an urgent need for cost optimization. Most organizations are now aware that AI isn’t an add-on – it’s a foundational capability that will be critical for future growth and competitiveness.

Given this, here’s our forecast:

• Managed services: 1.3% growth, no change from 2Q25. The Americas will carry the weight, but we expect Q4 to remain challenged, especially in EMEA.
• As-a-Service: 25% growth, a 400 bps increase from 2Q25. Modernization and AI demand will drive continued strength for IaaS capabilities and SaaS solutions.

Looking ahead to 2026, we expect managed services growth to improve slightly based on the green shoots we are seeing in BFSI and smaller deal sizes.