AI Demand Sparks Q1 Double-Digit Growth in Asia Pacific's Technology Services Market, ISG Index™ Finds

ISG’s Q1 ISG Index finds Asia Pacific technology services spending rose 16% year‑on‑year to US$7.1bn, driven by AI-led demand for cloud XaaS. XaaS climbed 18% to a record US$6.3bn, with IaaS up 19% (US$5.6bn) and SaaS up 15% (US$675m). Managed services returned to modest growth, up 1.9% (US$791m) after four quarters of decline, though ITO fell 32% to US$409m. Smaller markets (Southeast Asia, China, Korea) and verticals such as transportation and healthcare saw strong gains, while larger markets—India, Australia‑NZ and Japan—were weaker. ISG launched an ISG AI Index showing IaaS up 160% from AI impact and raised its 2026 XaaS revenue growth forecast to 25% (from 21%), keeping managed services at 2.1%. The results imply continued capital allocation toward cloud infrastructure and AI initiatives, supporting vendors and cloud providers but signaling uneven demand across geographies and service types.