IDC: Worldwide Services Revenue Posting Steady Growth

Worldwide revenues for IT Services and Business Services totaled $506 billion in the first half of 2018, an increase of 4% year over year, according to International Data Corporation (IDC), a market researcher headquartered near Boston. According to IDC’s Worldwide Semiannual Services Tracker, the first half of 2018 was a mixed bag for tier-one global outsourcers/integrators with more than $10 billion in services revenue. Most remained flat or declined slightly.

Project-oriented revenues grew by 5.2% in 1H18 to $191 billion, followed by 3.6% growth for managed services and 2.7% for support services. Most major management consulting firms posted strong earnings in 2018, although growth rates cooled slightly.

Outsourcing revenues grew 3.6% to $238 million in 1H18. Application-related managed services revenues (hosted and on-premise application management) outpaced infrastructure and business process outsourcing.

On the infrastructure side, while hosting infrastructure services revenue accelerated to 7.2% growth in 1H18, mostly due to cloud adoption, IT Outsourcing declined by 1.5%, largely chipped away by cloud cannibalization across all regions.

On a geographic basis, the United States, the largest services market, grew by 4.3%, slightly higher than the market rate, while Western Europe, the second largest market, grew only by 2.6%. The effect of the trade war will also not be felt until the end of this year or in 2019; therefore, it had no negative impact on services spending in 1H18, according to IDC. In Western Europe, most major vendors are showing some softness in the region. The newcomers’ (namely Indian services providers) expansion into Europe also cooled slightly, with vendors posting mixed results in the region depending on their customer industry mix. In emerging markets, Latin America, Asia/Pacific (excluding Japan) (APeJ), and Central & Eastern Europe led in growth. In Latin America, most major economies are turning the corner despite problems in Argentina and Venezuela.

Channel Impact^®
This growth reflects a relatively positive economic outlook during the first half of this year with accelerated digital transformation and, in some pockets, new digital services offsetting the cannibalization of traditional services.