Published on the 15/12/2020 | Written by Heather Wright
Robust market recovery to follow 2020 services slowdown…
After a rough year, IDC says there’s a ‘robust’ local market recovery for IT services next year as the brakes come off and investment in transformational, consulting and integration projects picks up again.
Topping the list for Australian and New Zealand businesses when it comes to project-oriented services – the growth market for services in the coming year – will be business continuity and crisis management consulting services, network and connectivity resilience and accelerated cloud investments as businesses look to reposition themselves for growth, IDC says.
“The forced acceleration of digital maturity will increase investment across major transformational, consulting and integration projects.”
Despite the shocker that was 2020, the IT and business services market did grow – albeit, just 1.7 percent year on year in the first half of 2020. That’s a significant drop from last year’s year on year growth of 4.4 percent.
But while IDC is forecasting growth for the year ahead, it’s still somewhat subdued, coming in at just 2.8 percent year on year, to take the overall A/NZ IT and business services market – which includes project oriented, managed services and support services – to just over US$26 billion in 2021.
Emily Lynch, IDC associate market analyst for ANZ IT services, says the project oriented market took a ‘major hit’ this year, with large projects put on hold or cancelled while businesses weathered the initial outbreak of the pandemic and sought to reduce costs wherever possible.
It’s not all bad news, though. Lynch says while that rapid transition to digital impacted spend on discretionary services and large transformational projects, it accelerated investment in tools and solutions to enable this adjustment.
“The resurgence of Covid-19 in both countries forced Australian and New Zealand organisations to adapt to purely digital ways of working and doing business,” Lynch says.
“This impacted spend on discretionary services and large transformational projects, but accelerated investment in tools and solutions to enable this adjustment. Businesses are positioning themselves for post-pandemic recovery and strengthening their digital resiliency”.
Across the year there have been hotspots of activity and growth in the overall IT sector – the security services market has seen steady growth and is tipped for a five-year compound annual growth rate of 12.3 percent for 2020-2024, and the Australian PC market was up 35.2 percent in Q2, while in New Zealand the PC market growth was nearly 40 percent, thanks to work from home demand. That PC growth continued in Q3, with the latest figures from IDC showing New Zealand’s traditional PC market has seen 24.4 percent growth for the quarter.
A Gartner survey, meanwhile, showed 54 percent of A/NZ CIOs were reporting increased funding for digital innovation this year, with two-thirds expecting it to increase in 2021.
When it comes to IDC’s IT and business services category, while project-oriented services spend took a rapid downward trajectory in both New Zealand and Australia, the managed services market was more resilient, as businesses were forced to adjust to new ways of working during Covid-19 lockdowns. That resulted in significant reliance on network, connectivity and endpoint solutions to ensure business resiliency, with hosted infrastructure, hosted application and network management services all seeing heightened activity this year.
The increased focus on eCommerce drove the need for customised and hosted applications for online purchasing.
“The acceleration in adoption of multi- or hybrid cloud strategies leads to organisations relying on managed cloud services providers to manage more complex environments, also lending resilience to the cloud hosting infrastructure space,” IDC says.
The A/NZ IT and business services market is expected to hit US$25.3 billion by the end of 2020 before the ‘robust recovery’ of 2021. Project oriented services are forecast to see a five-year CAGR of 2.2 percent in Australia and 2.6 percent in New Zealand for the 2019/2024 timeframe.
Says Lynch: “Covid-19’s forced acceleration of businesses’ digital maturity will increase investment across major transformational, consulting and integration projects.”