Global IT services market showed modest growth in 2023 - IDC
IDC report reveals 4.6 per cent revenue growth in 2023, driven by cloud services demand
The global IT and business services market experienced a slight cooling-off period in 2023, according to the latest data from IDC.
In its Worldwide Semiannual Services Tracker report, the market researcher revealed that while revenue grew from $1.17tr in 2022 to $1.22tr in 2023 when measured in constant currency, the year-over-year growth rate of 4.6 per cent was relatively muted compared to past years.
The expansion narrowly surpassed IDC's earlier forecast of 4.5 per cent growth for the market. However, when denominated in nominal US dollars based on current exchange rates, the revenue increase was a more modest 4.1 per cent over the previous year.
Despite the softening growth trajectory, the multi-trillion-dollar IT and business services sector continues to be a crucial backbone supporting enterprises and economies worldwide.
Managed services key driver in H2
The report noted that enterprise demand for cloud and digital transformation services remained robust, fueling an uptick in growth during the second half of 2023 after a deceleration in the market during the first six months of the year.
Support services and managed services were the primary drivers behind this second-half uplift, with the largest improvements occurring in the managed services segment.
The ongoing trend toward cloud-based services continues to be a major catalyst within managed services, as companies recognise the necessity of leveraging scalable infrastructure while simultaneously reducing costs and improving operational flexibility.
IT outsourcing, key horizontal business process outsourcing, and network and endpoint outsourcing services spearheaded these growth rebounds.
In contrast, the project-oriented professional services market experienced a slight slowdown over the course of 2023, according to IDC's data.
"Continued delays in decision-making and a tightening of end-user spending, particularly on smaller projects, contributed to market softening, but there are some bright spots during these uncertain times through migration and modernisation service offerings," said Eileen Smith, programme VP at IDC Data and Analytics.
"Service providers are emphasising agility and supporting companies and businesses in their transformation to digitise their operations, with cloud at its core."
Overall, a more stable performance during the second half of 2023 sets the stage for moderate growth in the upcoming year.
2024 Outlook
Worldwide IT and business services revenue is expected to grow to $1.28tr in 2024, or 4.7 per cent year-over-year growth (in constant currency).
As organisations worldwide navigate digital transformation, the demand for innovative services solutions continues to surge, driving growth and reshaping the landscape.
The short- to mid-term outlook for the market has been increased slightly because of stronger-than-expected vendor performance along with growth indicators from adjacent markets, and the five-year CAGR is now projected to be 5.1 per cent.
After strong bounce-backs in 2021 and 2022 followed by moderate growth in 2023, given the current economic conditions, IDC expects a general cool-down, especially in the latter years of the forecast.
In terms of primary markets, while the project-oriented market is still expected to outperform managed services and support services, achieving a 6.1 per cent CAGR across the observed period, its momentum is expected to slow down, especially compared to the robust growth seen in 2022.
Geographically, IDC has raised its outlook for the Asia/Pacific region and the Americas, while growth was adjusted downward mainly for EMEA.
"Organisations continue to recognise the value of technology investments even amidst uncertainties and continue to turn to service providers to enhance operational efficiencies, streamline processes, and improve customer experiences," said Stacey Soohoo, research director at IDC Worldwide Services Tracker.
"In the short term, service providers will focus on personalised offerings as organisations recognise that one-size-fits-all approaches no longer suffice.
"It is therefore no surprise that we see overall services growth driven by foundation markets like custom application development and hosting infrastructure services, where customisation and flexibility are key, allowing businesses to tailor tools and infrastructure to their unique requirements."