Services Revenue Post Steady Growth in 2H17

Services Revenue Post Steady Growth in 2H17

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Worldwide revenues for IT Services and Business Services totaled $502 billion in the second half of 2017 (2H17), an increase of 3.6% year over year (in constant currency), according to IDC.

For the full year 2017, revenues came to just shy of the $1 trillion mark (IDC expects 2018 revenues to cross this threshold). Year-over-year growth was around 4%, which slightly outpaced the worldwide GDP growth rate. The above-GDP-growth reflects stronger business confidence bolstered by a brighter economic outlook, a shared sense of urgency for large-scale digital transformation, and, at least in certain pockets and segments, new digital services beginning to offset the commoditization of traditional services.

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% year over year to $186 billion in 2H17 and 5% 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% in 2H17 and 8.2% 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. Because large digital 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 only 3.3% year over year to $238 million in 2H17. Application-related managed services revenues (hosted and on-premise application management) outpaced the general market significantly by growing more than 6% in 2H17 and 5.8% for the entire year. On the infrastructure side, while hosting infrastructure services revenue grew by 4.9% in 2H17, positively impacted by cloud adoption, IT Outsourcing (ITO), a larger market, declined by 2%. Combined, the two markets were essentially flat.

On a geographic basis, larger mature markets posted slower growth in 2H17. The United States, the largest services market, grew by 3.5%, in line with the market rate, while Western Europe, the second largest market, only managed 1% growth. In emerging markets, Latin America, Central & Eastern Europe (CEE), and Middle East & Africa (MEA) each grew around 7% in 2H17. In Latin America, most major economies are turning the corner.

Global Regional Services 2H17 Revenue and Growth (revenues in $US billions)

Global Region

2H17 Revenue

2H17/2H16 Growth

Americas

$258.3

3.9%

Asia/Pacific

$85.3

6.2%

EMEA

$158.5

2.0%

Total

$502.1

3.6%

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