- Americas' IT and business services sector grew 19% year-over-year in Q1 2025.
- XaaS services surged 33% to a record $9.2 billion, led by a 44% increase in IaaS.
- Managed services showed slight pressure with a 0.4% decline, while BPO fell 39%.
The Americas IT and business services market experienced significant growth in the first quarter of 2025, rising by 19% year-over-year to reach a combined market annual contract value (ACV) of $14.5 billion, according to Information Services Group (ISG) (III, Financial). This growth was primarily fueled by a robust demand for cloud-based services as companies continue digital transformations amid economic uncertainties.
The cloud-based as-a-service (XaaS) sector recorded a 33% increase, reaching $9.2 billion, marking the fourth consecutive quarter of double-digit growth. Infrastructure-as-a-service (IaaS) led this segment with a 44% year-over-year increase, reaching $6.6 billion, while software-as-a-service (SaaS) advanced by 12% to $2.6 billion.
Conversely, the managed services segment experienced slight pressure, declining by 0.4% year-over-year to $5.3 billion. A notable decline was observed in business processing outsourcing (BPO), which fell by 39% to $803 million. The number of smaller deals, valued between $5 million and $9 million, decreased by 5%, indicating pressure on discretionary IT spending.
Industries that emerged as significant gainers were financial services, rising by 12%, consumer packaged goods with a 47% increase, and media/telecoms up 31%. Defensive industries like energy, healthcare, and retail, however, moved to negative territory.
Looking forward to 2025, ISG offers two growth scenarios. The base scenario predicts 18% growth for XaaS and 1.3% for managed services. Conversely, the bearish scenario projects a moderation to 15% for XaaS and a contraction of 2.4% in managed services. These forecasts reflect potential impacts from trade policies and geopolitical tensions, suggesting a cautious outlook for the industry.
