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The global IT and business services market is bouncing back after a somewhat sluggish 2020, with the Asia Pacific and Japan (APJ) region expected to see a greater growth rate than the worldwide average this year.
Worldwide IT and business services revenue is expected to grow by 3.4 per cent – in constant currency – during 2021, according to new figures from analyst firm IDC. It is anticipated that the services market globally will top US$1.1 trillion in 2021.
And there’s more good news on horizon, with IDC anticipating that the market will continue to expand through 2023 and 2024 with growth between 3.8 per cent to 4.0 per cent annually.
These anticipated growth rates come after a broad slowdown in growth that struck in 2020, as COVID-19 embarked on its rampant march around the world.
IDC’s mid-term and long-term market growth expectations have actually increased slightly from its previous forecasts in April by 20 to 50 basis points each year, pushing the market's anticipated long-term growth rate to 4.3 per cent, up from the previous forecast of 4.1 per cent.
The main driver for this positive shift has been stronger demand for IT and business services across several regions outside the United States, particularly in areas where large government-led digitalisation programs and schemes are taking place, including in the Asia Pacific region, according to the firm.
However, IDC also noted that its Asia Pacific growth outlook has not changed significantly since its last forecast but continues to show steady recovery.
The growth outlook for the larger economies, such as Japan, South Korea and Australia, remains in the 2 per cent to 3 per cent range while the smaller economies are clocking faster growth, the firm claimed.
In fact, IDC has lifted its near-term and long-term growth forecasts for New Zealand and Singapore by 15 to 20 and more than 30 basis points, respectively.
As for the other emerging markets in the broader APJ region, the firm's outlook remains largely unchanged, with the analyst firm suggesting those countries can still enjoy a better growth outlook than most other regions or countries, even if 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, IDC global services markets and trends research director.
“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,” he added.
Predictions of a bounce-back in IT market spend due to pent-up demand accrued in 2020 are not new and have been circulating since early last year.
Much of the latest industry research and analysis has demonstrated how the market is now making up for lost time as that pent-up demand begins to make itself known.
Earlier this year, for example, analyst firm Frost & Sullivan suggested that global investment in data centre infrastructure was expected to surge past US$26 billion by 2025, driven by rampant data creation and pent-up demand.
And while some segments have seen greater growth than others, it is clear that this year has so far witnessed some level of investment resurgence.
Industry analyst firm Synergy Research claimed earlier this year that cloud infrastructure services spend in the second quarter of 2021 represented a US$2.7 billion increase over the prior quarter and a surge of 39 per cent over the tally for the second quarter of 2020.
But not everyone agrees.
Just days ago, technology research and advisory firm Information Services Group (ISG) suggested the annual contract value (ACV) for the managed services market across Asia Pacific fell to US$575 million during the third quarter of 2021, coming off the back of the US$929 million earned in the record-breaking three month period to 30 June.
However, the firm's latest estimate was still up by 53 per cent year-on-year when looking back at the same quarter last year.
Meanwhile, the as-a-service market in the region was up 62 per cent quarter-on-quarter to a record US$3.1 billion, ISG noted.
Clearly, the future continues to look rosy.
“The demand environment for technology and business services is as robust as we’ve ever seen,” said Steve Hall, partner and president of ISG.
“This is not just pent-up demand coming out of the pandemic, but a real structural shift for the market as enterprise customers accelerate their digital transformation strategies, modernise their legacy environments and move to the cloud.
“We see this trend continuing for the foreseeable future, even against some economic headwinds. There is no let-up in sight,” he added.