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Home Management Leadership Growth Strategies

Steady growth for IT and business services ahead

FutureCIO Editors by FutureCIO Editors
April 20, 2022
Photo by Akil Mazumder from Pexels

Photo by Akil Mazumder from Pexels

IDC forecasts the global IT and business services revenue to grow by 5.6% (in constant currency) in 2022. In nominal dollar-denominated revenue based on today's exchange rate, the market will grow by 4.2% year over year, due to FX fluctuation.

The improved market view reflects robust 2021 bookings and pipelines by several large services providers, an improved economic outlook (compared to the previous forecast cycle), and an inflationary impact on the services market, offset slightly by the negative impact of the Ukraine/Russia conflict.

IDC says the market will continue to expand throughout the next few years at a rate of 4-5%, representing an overall increase of 40 to 80 basis points each year, pushing the market's long-term growth rate to 4.6%, up slightly from the previous forecast of 4.3%.

APAC forecast

Asia/Pacific's growth outlook improved by 0.9 percentage points in 2022, largely due to PRC (China) and other developed Asian markets (i.e., Australia, Japan, Singapore, Korea, etc.). Japan's growth rate was lifted by 0.2 to 0.6 percentage points per year for the next five years while Australia, New Zealand, Korea, and Singapore all saw adjustments of 100+ basis points in 2022 and 2023 growth rates.

The forecast for China's market growth has been adjusted up to 6.4% and 8% for 2022 and 2023. While China's GDP growth is expected to cool down, IDC believes that digital transformation remains central to the country's long-term "new infrastructure" initiatives, which will further drive services spending in both the public sector and strategic industries such as BFSI, manufacturing, and energy.

Opportunities and Challenges ahead

Within the IT and business services markets and across all regions, cloud-related services spending has been the main growth accelerator since 2020. IDC forecasts it to continue to grow close to 20% year over year in 2022 and between 15% to 20% over the next three years.

It is also seeing more services providers crossing over from IT and business services to operational technology (OT) services, based on figures from IDC's new Tracker for services spending on the OT side (also defined by IDC as Digital Engineering & Operational Technology Services (or DEOTS)). Even after accounting for the supply-side disruption caused by the Ukraine/Russia crisis, we still forecast the product engineering & operational technology engineering services and operational technology services markets to grow twice as fast as IT and business markets.

Overall, while inflation may artificially boost market size in the short term, this is largely offset by demand instability and rising labour costs.

Xiao-Fei Zhang

"In this forecast cycle, IDC services analysts have looked at short-term impacts, such as pent-up demand and the Ukraine/Russia conflict, as well as more structural ones, such as the adoption of public cloud, the talent crunch, inflation, data security/residency/sovereignty, and more," said Xiao-Fei Zhang, program director, IDC Worldwide Services Tracker program.

He warned that at the individual vendor level, services providers will need to brace for more volatility. Enterprise buyers face another black swan event in 2022, which will accelerate large global trends, such as remaking the global supply chain and value chain and exacerbating the talent crunch by changing demographics.

"We should expect more of 'the unexpected' in the years to come. During the last two years, the services providers who succeeded were the ones who have proven to be resilient partners in helping their clients thrive in change. This has always been the constant force to drive growth in the services market," Zhang continued.

Related:  Gartner busts 2020’s top 10 cloud myths
Tags: IDCoperational technology
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