Technology Sector Update - Cloud ACV Growth Decelerates; ISG Moderates 2021 Outlook: ICICI Securities

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ICICI Securities Report

March 2021 Information Services Group Index suggested As-A-Service annual contract value growth decelerated versus December 2020 (from 26% to 15% YoY), led by the sharp slowdown in infrastructure as-a--service's ACV.

Even on absolute basis, As-A-Service ACV run-rate did not change much from pre-Covid-19 levels.

This is disappointing given the lofty counter-cyclical expectations around -

1. Covid-19 led acceleration in cloud migrations, and
2. the much needed optionality of variabalising fixed costs provided by cloud, which is particularly relevant in the current context.

While ISG indicated that deal renewal, restructuring activity is healthy, new scope seems limited.

As-A-Service growth outlook for CY21 was cut to 18% (from 20% in January 2021).

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