13 Oct 2021
Worldwide IT and Business Services Forecast Shows Signs of Improvement Due to Strong Demand and the Improving Economic Outlook, According to IDC
NEEDHAM, Mass. October 13, 2021 – Worldwide IT and business services revenue is expected to grow by 3.4% (in constant currency) in 2021, according to the International Data Corporation (IDC) Worldwide Semiannual Services Tracker. In nominal dollar denominated revenue based on today's exchange rate, the market will grow by 6% year over year, due to FX fluctuation.
The services market is forecast to top $1.1 trillion in 2021. This year's recovery is more or less in line with IDC's forecast from April. This has been consistent with what major vendors have been reporting in the first and second quarters of this year.
IDC believes that the market will continue to expand through 2023 and 2024 with growth between 3.8% to 4.0% annually. The mid-term and long-term market growth have also increased slightly by 20—50 basis points each year, pushing the market's long-term growth rate to 4.3%, up from the previous forecast of 4.1%. A better economic outlook has contributed to the improved optimism, but the main driver was the stronger demand for IT and business services across several regions outside the U.S., particularly where large government-led digitalization programs and schemes are taking place (i.e., in Europe, APAC, etc.).
The Americas services market is forecast to grow by 2.4% in 2021, down slightly from the April forecast in constant currency. The outlook for the U.S. remains largely unchanged with projects, managed services, and support services recovering in 2021. Even though U.S. GDP growth has softened in recent months, IDC continues to project the U.S. market to grow more than 2.3% this year and 3.7% in 2022.
Both Canada and Latin America's mid-to-long-term growth (in constant currency) have been adjusted downward marginally. Both are still forecast to see continued recovery well into 2022 and 2023. The changes largely reflect the timing of local recoveries.
The near-term outlook for Europe remains sanguine and unchanged. As previously forecast, Europe's recovery this year will fuel global recovery for the IT services market, accounting for around 30% of annual growth worldwide. Western Europe's annual growth rate over the next few years has been adjusted upward again by around 25 basis points due to an improved outlook across the major continental European economies. IDC is confident that the region will continue to grow above 3% in the following years, which will markedly outpace GDP growth, thanks to European governments' stimulus spending and long-term investment policies to target "digital transformation" and "new industries." The Central and Eastern Europe (CEE) growth rate was also adjusted upward accordingly: IDC estimates that CEE's growth rate will return to its pre-pandemic level (9%+) by the end of this year because of its relatively small base and the fast rebound from Russia.
The short-to-long-term growth rate for Middle East & Africa (MEA) was adjusted downward by 40—50 basis points compare to the April forecast. As energy and commodity prices soar again and large national projects are set in place to drive infrastructure and digital spending, IDC expects the region will return to its pre-pandemic growth of 6.5%+ by 2025. However, given the pandemic-related challenges MEA countries still face (slow vaccination rates, restrictions on travel, etc.), IDC remains cautious about the timing of the region's recovery.
Asia/Pacific's growth outlook did not change significantly. Mature markets continue to recover steadily: the growth outlook for the larger economies, such as Japan, South Korea, and Australia, remains in the 2—3% range while the smaller economies are clocking faster growth, particularly in this cycle. IDC has lifted the near-term and long-term growth for New Zealand and Singapore by 15—20 and more than 30 basis points, respectively.
Additionally, because certain markets are recovering slightly faster, IDC has shifted more mid-term growth rates to the near term to reflect this. For example, China's projected market size for the year has been adjusted upward to almost 11% (across most foundation markets) as buyers are more "squeezed" on the supply side. However, as this is driven partially by one-time "pent-up" demand from 2020, and thus not sustainable, 2022's growth rate will fall to just 4%, before eventually tracking back to its normal growth path.
As for the other emerging markets in the region, IDC's outlook remains largely unchanged: they still enjoy better growth outlook than most other regions/countries, but short-term growth is more susceptible to extraneous factors.
"The need for digital transformation and the demographic squeeze on (the right) talent pool, expedited by the pandemic, global supply chain disruptions, and lose monetary policies, have created the perfect push and pull for enterprise buyers; therefore, our long-term growth outlook for the IT and business services market remains sanguine," said Xiao-Fei Zhang, research director, IDC Global Services Markets and Trends. "Additionally, we are seeing large services providers also making big bets, both organic and inorganically, on the operations and product side, which enjoys more than twice the market growth of the existing IT/business services market, according to our latest Digital Engineering & Operational Technology Tracker's latest figures."
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