Spending on IT and Business Services Proves to be Resilient

Worldwide IT and business services revenue is expected to grow in constant currency from $1.13 trillion in 2022 to $1.2 trillion in 2023, or 5.7% year-over-year growth, according to IDC. In nominal dollar-denominated revenue, the market will grow by 3.5% due to exchange rates.

This represents an increase of 110 basis points from IDC's previous forecast, which projected 2023 growth to be 4.6% and less than 5% in the following years in constant currency. The mid-to-long-term outlook for the market has also increased slightly. The five-year compound annual growth rate (CAGR) is now projected to be 5.2%, compared to the previous forecast of 4.9%. IDC has raised the growth projection despite a weak economic outlook largely because of stronger-than-expected vendor performances across the 2022 finish line, growth indicators from adjacent markets, increased government funding, and, to some extent, inflation impacts.

The actual 2022 market growth was 6.7% in constant currency, which was 87 basis points higher than forecast last year, although some softness appeared in reported bookings in 4Q22. After strong bounce-backs in 2021 and 2022, we expect the market to cool down moderately to the 5.5-5.7 percentage range for the next five years, given the current economic conditions. Most of the uplift in 2023 will be from managed services and project-oriented markets (professional services). Professional services' (project-oriented market) short-term and long-term growth rates were adjusted upward from the previous forecast's 5.5%-6% range to close to 7% (in constant currency).

While IDC still believes the recession will have a direct impact on professional services, the strong growth in 2022, including business consulting, suggests that slowdowns in 2023 and 2024 will be milder than previously assumed, further helped by lower attrition rates, partial inflation-adjusted price adjustments, as well as the need for companies and governments to digitize their operations. Geographically, IDC has raised its outlook for the Asia/Pacific region and the United States while growth was adjusted downward mainly for Europe, the Middle East, and Africa (EMEA).