Strategic investment in business technology is led by CIOs and CTOs that launch new digital transformation initiatives. Those digital growth plans result in the modernization of IT infrastructure. However, an internal IT staff skills shortfall will continue to fuel demand for more savvy and experienced digital business talent.
Worldwide revenues for IT Services and Business Services totaled $502 billion in the second half of 2017 (2H17) — that’s an increase of 3.6 percent year-over-year (in constant currency), according to the latest market study by International Data Corporation (IDC).
Digital business services market development
“As customers look to digital transformation initiatives to stay relevant in the new economy, vendors face both opportunities and challenges,” said Xiao-Fei Zhang, program director at IDC. “While automation and new cloud delivery models reduce overall price, new digital services will require clients to spend more time and resources to modernize their existing IT environment,”
For the full year 2017, worldwide services revenues came to just shy of the $1 trillion mark. Year-over-year growth was around 4 percent, which slightly outpaced the worldwide GDP growth rate. The growth in professional services reflects stronger business confidence that’s fueled by a brighter economic outlook and a shared sense of urgency for large-scale digital transformation projects. Looking at different services markets, project-oriented revenues continued to outpace outsourcing and support & training, mainly due to organizations freeing up pent-up discretionary spending from earlier years and feeling the need to digitize their organizations via large scale projects.
Specifically, project-oriented markets grew 4.6 percent year-over-year to $186 billion in 2H17 and 5 percent to $366 billion for the entire year. Most of the above-the-market growth came from business consulting: its revenue grew by almost 7.8 percent in 2H17 and 8.2 percent for the entire year to $115 billion.
In large digital transformation projects, high-touch business consultants continue to extract more value than mere IT resources do. Most major management consulting firms posted strong earnings in 2017. IT-related project services, namely custom application development (CAD), IT consulting (ITC), and systems integration (SI), still make up the bulk — more than two thirds — of the overall project-oriented market. While growing slower than business consulting, these three markets showed significant improvement over the previous year: CAD, ITC, and SI combined grew by 3.7 percent year-over-year to $251 billion for the full year 2017.
IDC believes that some 2015 and 2016 projects were pushed out to 2017, which helped to drive up spending during 2H17. This coincides with the strong rebound on the software side, as IT project-related services are largely application driven. Because large digital business projects not only drive up new services but also pull in traditional services, IDC believes that the actual volume of IT project services grew even faster in 2017 but was offset somewhat by lower pricing.
In outsourcing, revenues grew by 3.3 percent year-over-year to $238 million in 2H17. Application-related managed services revenues (hosted and on-premise application management) outpaced the general market – growing more than 6 percent in 2H17 and 5.8 percent for the entire year. Enterprise buyers have leveraged automation and cloud delivery to reduce the cost of operating IT applications. For example, infusing artificial intelligence (AI) into application life-cycle activities to drive better predictive maintenance and application portfolio management. However, in their continuing drive for digital transformation, organizations are increasingly relying on external professional services providers to navigate complex technical environments and supply talent with new skills (hybrid cloud, big data analytics, machine learning, blockchain). Digital transformation also requires organizations to standardize and modernize their existing IT application assets. Therefore, IDC forecasts application outsourcing markets to continue outpacing other outsourcing markets in the coming years.
Outlook for IT outsourcing service growth
On the infrastructure side, while hosting infrastructure services revenue grew by 4.9 percent in 2H17, positively impacted by cloud adoption, IT Outsourcing (ITO), a larger market, declined by 2 percent. Combined, the two markets were essentially flat. IDC believes that while overall infrastructure demand remains robust, the ITO market is negatively impacted the most by cloud cannibalization across all regions: cloud, particularly public cloud, reduces price far greater than new demand grows. For example, IDC estimates that, by 2021, almost one third of ITO services revenue will be cloud-related.
Source: By David H Deans / cloudcomputing-news.net/news