- Global IT and business services market hits a record $29.2 billion in Q2 2025, driven by booming AI-driven cloud demand.
- XaaS segment grew by 28% year-on-year, reaching $18.7 billion, with IaaS seeing a 34% increase.
- Managed services ACV rose 2.3% year-on-year to $10.6 billion, driven by growth in the transportation sector.
The global IT and business services market has reached new heights, with the second quarter of 2025 seeing a combined annual contract value (ACV) of $29.2 billion, marking a 17% increase from the previous year. This growth, reported by Information Services Group (ISG) (Nasdaq: III), is largely attributed to the rising demand for cloud-based AI services. The company's ISG Index shows robust demand across both managed services and cloud-based as-a-service (XaaS) segments.
Cloud-based as-a-service (XaaS) ACV surged by 28% year-over-year to a record $18.7 billion, its fourth consecutive quarter of double-digit growth. The infrastructure-as-a-service (IaaS) category maintained strong momentum with a 34% rise, reaching $14.5 billion, as major providers like AWS, Microsoft Azure, and Google Cloud increased their infrastructure investments. However, software-as-a-service (SaaS) lagged with a modest 9% increase, down 4% from the first quarter due to ongoing caution among enterprises.
Managed services continued to show resilience, with a second-quarter ACV of $10.6 billion, up by 2.3% compared to last year. Growth was primarily driven by the transportation sector, growing 81%, and other industries such as energy, healthcare, retail, and manufacturing witnessing double-digit rises. Despite a 5% year-on-year decrease in managed services contracts, the number of new-scope awards increased by 10%, indicating a shift towards larger, more strategic deals.
Overall, the first half of 2025 saw a combined market ACV of $58.3 billion, an 18% hike from the previous year. ISG maintains its forecast of a 1.3% growth in revenue for managed services throughout the year, while raising its growth forecast for cloud-based XaaS by 300 basis points to 21%, spurred by persistent AI-driven transformation demand.
According to Steve Hall, President and Chief AI Officer of ISG, "AI remains the dominant theme, overcoming various market uncertainties to propel overall industry growth." As ISG continues to navigate through high business uncertainty, the firm emphasizes AI's pivotal role in driving the market forward.
