ISG Launches First-of-its-Kind Index to Measure AI's Impact on Technology Services Sector
Composite ISG AI Index™ up 77% since December 2022 inception
Infrastructure leading the way, up 160%, followed by software, up 53%, and services, up 0.3%
Information Services Group (ISG) (Nasdaq: III), a global AI-centered technology research and advisory firm, today launched the ISG AI Index™, a first-of-its-kind benchmark that measures how AI is impacting the global technology and business services sector.
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The ISG AI Index is a companion to the ISG Index™, the firm's longstanding and authoritative source for marketplace intelligence on the global technology and business services industry. Detailed findings of the inaugural ISG AI Index will be presented during ISG's first-quarter ISG Index presentation today at 9 a.m., U.S. Eastern Time.
"For 94 consecutive quarters, ISG has measured the performance of the global technology services industry through our ISG Index," said Michael P. Connors, chairman and CEO of ISG. "Our highly respected and trusted barometer has evolved over the years to reflect the seismic changes in our industry, including the advent of cloud-based services. Now, the industry is at a new inflection point. It needs a new way to measure the impact of AI on the broader technology services market. The ISG AI Index is that benchmark."
The ISG AI Index is pegged to a December 2022 starting point. "We selected this month since it coincides with the November 30, 2022 release date of ChatGPT 3.0 and the start of the current AI era," said Connors. "From there, we are tracking the impact of AI on technology infrastructure, software and services on an ongoing basis, with initial results through the end of 2025."
Inaugural Results
The inaugural results of the ISG AI Index show that infrastructure-as-a-service (IaaS) has seen the greatest impact from AI, up 160 percent. Software as-a-service (SaaS) has risen 53 percent while managed services is up only slightly, at 0.3 percent. On a market-weighted basis, the composite ISG AI Index was up 77 percent since inception.
"What we are seeing from the ISG AI Index is that AI is already reshaping the technology services sector, but not evenly," said Steve Hall, the firm's chief AI officer who leads both the ISG Index and the new ISG AI Index. "Infrastructure is capturing the first wave of growth, as hyperscalers add data center capacity to meet rising demand. Software is monetizing next, while managed services is still in the build-out phase, and that likely means the bigger services impact is still ahead of us."
The ISG AI Index measures each of the three market segments through a combination of key performance indicators: revenue, profitability and stock price performance, along with one forward-looking AI indicator unique to each segment.
"For each segment, we picked one indicator that best shows how AI is impacting that part of the market," Hall said. "In infrastructure, we use capital expenditure, because it tells us how much capacity hyperscalers are building ahead of demand. In software, we use current remaining performance obligations, or cRPO, which is essentially backlog—revenue that's been sold but not yet recognized, making it one of the best forward-looking indicators of demand. And in services, we use revenue per employee, because it gives us a simple view of productivity—how much output providers are generating from their workforce as AI starts to change how work is done."
Segment Performance
The clearest signal of AI's impact on infrastructure services is capital expenditure, which is up 265 percent since the inception of the ISG AI Index. Revenue is up 100 percent, profitability is up 60 percent, and stock performance is up 113 percent.
In software, revenue is up 61 percent, profitability is up 18 percent and stock performance is up 39 percent, with cRPO up 71 percent. "This shows the market is still buying and backlog is still building. The market is simply trying to work out how AI changes pricing, monetization and long-term economics," Hall said.
While the managed services composite is roughly flat, Hall said the underlying signals show revenue up 8 percent, profitability up 4 percent, stock performance down 36 percent and revenue per employee up nearly 8.5 percent. "What this tells us is that AI has started to improve productivity in services, but that has not yet translated into broad-based monetization or market confidence," Hall said. "AI is having an impact, but that impact is still in the early stages."
The next edition of the ISG AI Index, to be published after the second quarter, will include additional market measures: AI sentiment, tracking enterprise signals on demand, pricing, margins and investment priorities, and AI maturity, measuring enterprise readiness, constraints and adoption levels.
Further details about the ISG AI Index and its methodology can be found here.
About ISG
ISG (Nasdaq: III) is a global AI-centered technology research and advisory firm. A trusted partner to more than 900 clients, including 75 of the world's top 100 enterprises, ISG is a long-time leader in technology and business services that is now at the forefront of leveraging AI to help organizations achieve operational excellence and faster growth. The firm, founded in 2006, is known for its proprietary market data and research, in-depth knowledge and governance of provider ecosystems, and the expertise of its 1,500 professionals worldwide working together to help clients maximize the value of their technology investments.
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Press Contacts:
Will Thoretz, ISG
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Eric Arvidson, Matter Communications for ISG
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