2020 will be challenging for IT services vendors that are slow to adjust their business models to address rapidly changing market needs
IT services revenue will retain its low single-digit growth trajectory through 1Q20 before it begins to decelerate due to COVID-19
IT services year-to-year trailing 12-month revenue growth, at 2.2% in USD, was up 30 basis points sequentially in 4Q19 and down 400 basis points against the year-ago compare. During 4Q19, benchmarked IT services vendors continued to invest to expand their portfolios and resources to enable business transformations through next-generation technologies that support enterprisewide transformation initiatives across front-, middle- and back-office functions. Lingering growth challenges in traditional IT service areas; competitive pressures in growing IT service areas such as digital, cloud and cybersecurity; and unfavorable market dynamics tied to rising macroeconomic uncertainties and pockets of tight spending slowed vendors’ revenue performance in 4Q19.
Average profitability for benchmarked vendors contracted 80 basis points year-to-year to 11.2% in 4Q19 as some vendors continued to find it hard to balance addressing revenue pressures with investing in portfolio expansion, talent development, organizational restructuring and service delivery improvement such as through automation, AI and platform-delivered services.
In the 3Q19 IT Services Vendor Benchmark, TBR predicted a correction in economic performance in 2020 that will stall digital transformations and slow growth for IT services vendors and consultancies. TBR’s expectation is that IT services revenues will continue to grow in 1Q20 following a flat trend over the past four quarters; however, we anticipate revenue growth will begin to decelerate in 2Q20 due to the COVID-19 pandemic, which spread more widely in February before accelerating its impact in March and April. As widespread business disruption occurs in Europe, the U.S. and Asia Pacific due to COVID-19, it will affect customer demand for IT services in 2020.
TBR’s IT Services Vendor Benchmark details and compares the initiatives of the largest global IT services vendors and tracks their revenue and performance. The report includes information on market leaders, vendor positioning, the IT services market outlook, key deals, acquisitions, alliances, new services and solutions, and personnel developments.
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