IDC: Worldwide Services Market Momentum Derailed by COVID-19 Pandemic
Worldwide IT Services and Business Services revenue grew 5% year over year in 2019, according to the International Data Corporation (IDC) Worldwide Semiannual Services Tracker, but the 2020 outlook has turned as a result of the COVID-19 pandemic. This is the first time since the two world wars that the global economy has been disrupted both by demand and supply at such a scale, according to the Framingham, Massachusetts-based market researcher.
This represents the second consecutive year the market has accelerated since 2017 (from 4% growth in 2017 to 4.2% in 2018 and 5% in 2019) despite a cooling economy (2019 world GDP slowed to just above 3%). Large services vendors also reported stronger bookings and book-to-bill ratios mostly above 1, portending buyers’ overall optimism, as well as their appetite for more digital transformation.
IDC forecasts the worldwide services market will decline 1.1% in 2020 and grow just over 1% in 2021. The new forecast is based on the Economist Intelligence Unit’s projection that the real 2020 GDP will likely contract by more than 2%, with a sharp decline in Q1 and Q2 offset by recovery in the second half of the year.
Most regions are expected to contract somewhat in 2020 but with different severities. Overall, Asia/Pacific will continue to grow, while the Americas will contract slightly in 2020. Europe, the Middle East and Africa (EMEA) will be the most negatively impacted.
The Americas services market is expected to contract by 0.2% this year, down from the 5.2% growth experienced in 2019. IDC expects it to bounce back to growth in 2021 and eventually get to 3% or more. But the five-year compound annual growth rate is anticipated to be considerably lower than previously forecast. This will be driven largely by the US market, which is predicted to remain flat in 2020 – tapering slightly from revenues of $485.6 billion in 2019 to $484.7 billion this year, or a 0.18% decline. US government and private sectors are putting off new projects to delay discretionary spending decisions due to market uncertainty. Project-oriented markets, such as consulting, custom application development, systems integration, etc. are expected to suffer short-term revenue downfalls. Growth in this segment is expected to be just 0.4% in 2020, down from last year’s 7.4%. Managed services are expected to shrink slightly (-0.7%), and support services will be flat, according to IDC.
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