Ongoing investments in Digital Transformation projects continue across the globe. Worldwide information technology (IT) and business services revenue is expected to grow by 5.6 percent in constant currency during 2022, according to the latest market study by International Data Corporation (IDC).
The 2022 market growth will increase by 160 basis points from IDC’s October 2021 forecast. The improved market view reflects 2021 bookings and pipelines by several large services providers, an improved economic outlook, and an inflationary impact on the services market.
IDC believes that the market will continue to expand throughout the next few years at a rate of 4-5 percent, representing an overall increase of 40 to 80 basis points each year, pushing the market’s long-term growth rate to 4.6 percent — that’s up slightly from the previous forecast of 4.3 percent.
IT and Business Services Market Development
The Americas services market is forecast to grow by 5.3 percent in 2022 — that’s up 150 basis points from the October 2021 forecast. This is attributed to a faster economic rebound and the impact of inflation.
IDC believes that the trend will continue in the short-term: 2022 and 2023 growth rates were adjusted up by 150 and 100 basis points, or around 4 percent year-over-year growth for the next five years.
The growth prospects for Canada and Latin America improved marginally. Both regions will continue to see recovery well into 2022 and 2023. Latin America’s near-term growth outlook is further lifted by the commodity price rally since March.
The outlook for the U.S. market has also been adjusted by 160 and 80 basis points for 2022 and 2023, respectively. The adjustments were made across all regional markets.
The improved economic outlook and vendors’ strong bookings and pipelines in the U.S. services market partially drove this upward change, while the rest can be attributed to inflation impact assumptions, especially in project-oriented markets. The long-term U.S. growth prospect remains largely unchanged.
The 2022 growth forecast for EMEA (Europe, Middle East, and Africa) was raised by more than 220 basis points. While Europe is the most impacted region by the ongoing war in Ukraine, IDC remains sanguine in the region’s future prospects.
IDC has reduced the Central & Eastern Europe (CEE) forecast significantly due to the war in Ukraine. IDC expects the CEE services market to grow by 5.5 percent and 7.3 percent in 2022 and 2023, respectively — that’s down from IDC’s previous forecast of 9-10 percent growth.
Unsurprisingly, the markets in Russia and Ukraine will shrink significantly this year.
Western Europe’s near-term growth forecast has been adjusted up: IDC now forecasts the region to grow by more than 6 percent in 2022 — that’s up by 280 basis points from the last IDC forecast.
The improved outlook is largely due to the EU’s revised 2022 GDP outlook at the end of 2021. IDC continues to see EU-funded investments driving services spending. Inflation also contributed to nominal growth, although to a smaller degree.
This was partially offset by the war in Ukraine. Based on IDC’s March assumptions, which assumed a more neutral scenario, they believe that the ongoing war in Ukraine will dampen Western Europe’s mid-term market growth but will be offset by other drivers.
The Middle East & Africa’s (MEA) growth prospects for 2022 and 2023 have also been raised by 250 and 100 basis points, respectively. Due to a strong rebound from the COVID-19 pandemic and economic malaise, particularly in previously beleaguered markets such as Turkey, as well as rapid IT infrastructure spending, including public cloud hyperscaler buildouts, IDC analysts are bullish on the MEA market.
The Asia-Pacific growth outlook improved by just 0.9 percentage points in 2022, largely due to China and other developed Asian markets. 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 percent and 8 percent 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 infrastructure initiatives, which will further drive services spending in both the public sector and strategic industries.
Outlook for IT and Business Services Growth
Within the IT and business services markets and across all global regions, cloud-related IT services spending has been the main growth accelerator since 2020. IDC forecasts these services to continue to grow close to 20 percent year-over-year in 2022, and between 15 percent to 20 percent over the next three years.
IDC is also seeing more services providers crossing over from IT and business services to operational technology (OT) services, based on figures from IDC’s latest research findings. Even after accounting for the supply-side disruption caused by the war in Ukraine, IDC analysts still forecast the OT services markets to grow twice as fast as the IT and business services markets.
That said, I anticipate corporate sustainability, and the shift to distributed workforce models will drive new strategic business technology investments. Moreover, demand for professional services will grow as more organizations seek guidance for their competitive people, process, and technology agenda.
Digital Transformation projects will remain at the forefront of this increased strategic business technology spending trend. It will continue to fuel digital growth in the Global Networked Economy.
Management consultants and global systems integrators have a key role to play as partners with the most qualified IT and enterprise networking vendors. Together, they will become the trusted advisors to C-suite decision-makers who must carefully choose the most compelling investment opportunities.