The IT services market is very large ($1,740 billion in the year to the end of June – as sized in this post), quite profitable ($181 billion net profit) and growing (8% in the year to the end of June).
In my Figure I show these data elements for the seven subsectors I track. It’s important to note that – although far exceeding the other five areas in growth – IaaS and PaaS cloud services are still very small in terms of revenue and net profit (shown in the comparative size of each bubble in the chart).
The IT services market is a difficult one to classify and size for a number of reasons;
- One is the attachment of these activities to the ITC industry – should we exclude management, accountancy and other business services sold to organisations which include some IT and/or communications elements, but whose main focus is on other subjects? If yes, do we size the whole engagement, or just the ITC elements?
- Another is the ‘incestuous’ relationship between suppliers, who often contract with each other to execute projects. If we want to size markets from the point of view of user spending, then we should avoid double-counting these ‘ITC supplier to ITC supplier’ revenues.
- A third is the bundling of hardware, software and services elements into solutions. Should we attempt to estimate the underlying components? And, if so, how?
In this post I’ve taken a pragmatic approach which excludes business services, includes the overlap and splits solutions into their elements. I recognise that there are many other ways of looking at the market and strive to be adaptable when executing my own IT services projects for my customers.
IT service market shares differ greatly by region (see my Figure where I show the revenues of the top 10 in the three regions and worldwide). There are more IT services companies in the world than in any other category – tens of thousands in each region; which means that the largest suppliers share far less of the total than in most other areas.
This is one area of our industry where local suppliers have managed to retain their importance; only two of the leading suppliers in the Americas and three in Asia Pacific are ‘foreign’ and, although six of the top 10 in EMEA are from outside the region, this is still demonstrates a much stronger position than the hardware market, where there are currently almost no EMEA suppliers of global importance.
IT services is changing as many customers look to move away from three to five year fixed contracts towards more flexible models which allow them to innovate and use cheaper (often cloud service-based) resources. Suppliers are using automation and AI to provide more efficient support. Time will tell whether or not this market becomes dominated by global suppliers, who of course need to demonstrate deep knowledge of the regulations and peculiarities of each of the countries they serve.