The latest quarterly report from Information Services Group (ISG), a global technology research and advisory firm focused on AI, reveals that the Americas region experienced a record-breaking second quarter in IT and business services demand. This surge is driven by enterprises’ growing appetite for AI adoption, cloud investments, and strategic cost optimization efforts.
According to the ISG Index, which tracks commercial outsourcing contracts valued at $5 million or more, the combined annual contract value (ACV) for managed services and cloud-based as-a-service (XaaS) in Q2 2024 reached $15.5 billion. This marks a 26% year-over-year increase – the strongest quarterly growth rate the region has seen in three years—and a 6% rise from the previous quarter.
The performance was fueled by significant gains in both managed services and cloud services. Managed services ACV rose 20% year-over-year to $5.9 billion, representing the highest growth since Q3 2023 and the third consecutive quarter of gains, a trend not seen since 2022. Cloud-based XaaS grew even faster, with a 29% increase bringing its ACV to $9.6 billion. ISG attributes this momentum to enterprises scaling AI initiatives by leveraging cloud platforms.
Contract activity also reflected increased enterprise commitment. A total of 392 managed services deals were signed in the quarter, 10% more than a year earlier. Notably, five of those deals were mega-contracts worth at least $100 million in ACV, up from four in the same period last year and three in Q1. The value of those mega-deals surged 81% year-over-year, underscoring a shift toward larger, more consolidated outsourcing agreements to streamline costs and fund innovation.
Despite a slowdown in lower-value contracts under $10 million, likely tied to delays in discretionary spending, new-scope contract volume and ACV climbed more than 30% compared to Q2 2023 – highlighting continued demand for transformation-driven services.
Industry-wise, several sectors posted standout growth. Manufacturing surged by 69%, travel, transportation, and hospitality rose 68%, and energy-related managed services jumped 78%. Banking, financial services, and insurance (BFSI) – the region’s top market by contract value – grew 20%, while healthcare followed with a 33% increase.
“The market acceleration in the Americas continues,” said Todd Lavieri, ISG Vice Chairman and President for the Americas and Asia Pacific. “Despite broader macroeconomic uncertainty, enterprises remain focused on cloud transformation and AI-driven reinvention. At the same time, they are turning to managed services to drive down costs and reinvest savings into innovation.”
Managed Services
Within managed services, application development and maintenance (ADM) was the primary growth engine for IT outsourcing (ITO), with ITO ACV rising 32% to $4.6 billion. Business process outsourcing (BPO), however, declined by 20% to $920 million, reflecting widespread challenges across service lines. Engineering, research, and development (ER&D) saw a 35% increase to $326 million.
On the XaaS side, infrastructure-as-a-service (IaaS) experienced substantial growth, jumping 39% to $7.2 billion, while software-as-a-service (SaaS) grew more moderately at 7%, reaching $2.5 billion.
The first half of 2024 also reflected this upward trend. Combined ACV for the Americas reached $30.1 billion, up 22.5% year-over-year. Managed services rose 11% to $11.3 billion, with 783 deals signed, including eight mega-deals. ITO increased 24% to $8.8 billion, while BPO fell 29% to $1.8 billion. ER&D rose 22% to $758 million. BFSI remained the largest contributor, adding $550 million in new contract value during the period.
XaaS services continued to expand rapidly in the first half of the year, with overall spending increasing by 31% to $18.7 billion. IaaS led the way with a 42% increase to $13.8 billion, while SaaS rose 7.5% to $5 billion.
Looking ahead, ISG maintains its 2025 forecast of 1.3% growth in managed services revenue, pointing to a more stable macro environment. However, based on continued AI adoption and strong demand for digital transformation, the firm has revised its growth outlook for XaaS upward, increasing its forecast by 300 basis points to 21%.
The results suggest that businesses across the Americas remain committed to scaling AI, consolidating vendor relationships, and driving technology-driven efficiencies – regardless of economic headwinds.
