IT and Business Services Markets Poised for Steady Growth
Worldwide IT and business services revenue is expected to grow by 5.6% in 2022, according to IDC. In nominal dollar-denominated revenue-based current exchange rate, the market will grow by 4.2% year over year, due to FX fluctuation.
The 2022 market growth represents an increase of 160 basis points from IDC's October 2021 forecast. 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 believes that 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%.
The Americas services market is forecast to grow by 5.3% in 2022, up 150 basis points from the October 2021 forecast (in constant currency.) This is attributed to a faster economic rebound and the impact of inflation. While Europe is the most impacted region by the ongoing Ukraine/Russia conflict, IDC remains sanguine on the region.
Central & Eastern Europe forecast was significantly reduced due to the conflict in Ukraine. The CEE services market is expected to grow only by 5.5% and 7.3% in 2022 and 2023, respectively, down from the previous forecast of 9-10% growth. Russian and Ukraine markets 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% in 2022, up by 280 basis points from our last forecast. The improved outlook is largely due to the EU's revised 2022 GDP outlook at the end of 2021 (before the Ukraine/Russian crisis). IDC continues to see EU-funded investments driving services spending. Inflation also contributed to nominal growth, although to a smaller degree.
The Middle East & Africa's (MEA) growth prospects for 2022 and 2023 have also been raised by 250 and 100 basis points, respectively. Asia/Pacific's growth outlook improved by 0.9 percentage points in 2022, largely due to PRC (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% and 8% for 2022 and 2023.
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. IDC is also seeing more services providers crossing over from IT and business services to operational technology (OT) services.
"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. "Based on our analysis, we adjusted our outlook accordingly at the market level. However, at the individual vendor level, services providers will need to brace for more volatility," Zhang continued.
"On the heels of a global pandemic, 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 service 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," concluded Zhang.