A report from Information Services Group (ISG) suggests that managed services growth remains steady year over year, but demand is shifting across industry sectors.
ISG tracks new managed services contracts worth more than $5 million that are awarded each quarter. In the third quarter, organizations awarded 722 contracts. That marks the 11th consecutive quarter with more than 700 contracts.
However, the total value of those contracts reached $11.3 billion, including eight deals valued at more than $100 million. Even so, contract volume declined 8 percent from the record high set last year. Through the first nine months of 2026, spending on managed services reached $33.5 billion, a 2.7 percent increase.
Unexpected growth leaders emerge
The most notable shift occurred within individual industry sectors. Consumer packaged goods and retail led growth, rising 202 percent and 66 percent, respectively.
Historically, neither sector has been among the largest consumers of managed services. By contrast, two of the biggest managed services markets, telecommunications and banking, financial services, and insurance (BFSI), declined 19 percent and 20 percent, respectively.
Growth in manufacturing helped offset some of that weakness. Spending in the sector increased 13.5 percent year over year.
Service categories tell a mixed story
The report also highlights varying demand across service categories.
IT outsourcing (ITO) remained essentially flat, increasing just 0.3 percent to $8.4 billion. Application development and maintenance (ADM), the largest service category, declined 8 percent.
At the same time, business process outsourcing (BPO) grew 12 percent year over year to $2.1 billion. That marks its fourth consecutive quarter of double-digit growth. Industry-specific services, facilities management, and bundled back-office services all performed well, while customer experience services declined.
Engineering, research, and development (ER&D) services fell 3 percent to $814 million.
Cloud and AI spending accelerate
While managed services spending remains relatively stable, spending in other areas continues to surge.
Infrastructure-as-a-service (IaaS) consumption jumped 115 percent to $35.5 billion. Software-as-a-service (SaaS) spending increased 21 percent to $5.6 billion, its strongest growth rate in more than four years.
What it means for MSPs
ISG is maintaining its 2.1 percent managed services growth forecast for 2026. However, demand patterns are becoming increasingly volatile. MSPs may need to adjust their strategies and focus on different industry sectors as economic conditions evolve.
At the same time, many organizations are reallocating IT budgets to fund artificial intelligence (AI) initiatives. That shift could affect spending priorities across multiple technology categories.
Of course, market conditions can change quickly. Ongoing conflicts in the Middle East and Ukraine could ease. New trade agreements with China and Canada could emerge. AI adoption could also become less expensive as open-weight AI models gain traction.
Regardless of how organizations consume managed services today, successful MSPs understand that market conditions can shift rapidly. The ability to adapt remains one of their most valuable strengths.
Photo: Business/Finance / Shutterstock
This post originally appeared on Smarter MSP.