A new report from the research firm ISG is shedding light on IT spending in America from Q1 of 2025, revealing that despite economic uncertainty, demand for IT and business services is on the rise.
The firm’s Americas ISG Index measures “commercial outsourcing contracts with annual contract value (ACV) of $5 million or more.”
According to the research, the ACV in the first quarter of the year was $14.5 billion, which is a 19% increase from last year. However, compared to Q4 of 2024, it was down by 0.2%, a slight decrease.
“The Americas market was driven by strong cloud and AI demand, as companies continued their digital transformations in Q1 despite economic uncertainty and the prospect of U.S. tariffs,” said Todd Lavieri, vice chairman and president of ISG Americas and Asia Pacific.
ISG noted that the managed services segment was struggling, experiencing a 2% decrease since the same time last year. Smaller deals saw a 5% decrease since the same time last year, which is the third time in the last four quarters that segment saw declines. According to Lavieri, these decreases could indicate that discretionary spending is more restricted.
He also expects to continue seeing an increase in volatility in the next several months because of tariffs and “the potential for retaliatory measures by U.S. trading partners.”
Predictions for the rest of the year are based on two possible scenarios. One is that the tariffs stabilize by midyear, leading to faster decision making in the second half of the year. If that scenario happens, ISG predicts cloud-based-as-a-service (XaaS) to grow 18% and managed services to grow 1.3%.
The second scenario is that tariffs extend through the third quarter or longer, and immigration enforcement, wage issues, and potential retaliatory digital services taxes in the EU result in more of a pullback. In this case, XaaS would grow 15% and managed services spending would fall 2.4%.
“We remain cautious in our base case, but not pessimistic,” said Lavieri. “The signals from Q1 are fundamentally strong. The shift we’re seeing is not one of declining demand, but one of delayed commitment.”
