IT Services Forecaster™ Growth Forecast Report for C4Q 2016

Extensive study of true growth (organic, constant currency) across 19 IT services market segments indicates that the market grew by 3.3% YOY in the quarter ending December 2016, equal to the same period in 2015. The YOY deceleration experienced in Consulting & Systems Integration service line, Banking, Financial Services & Insurance vertical and Europe region were offset by YOY acceleration in Infrastructure Outsourcing service line, Public Sector vertical and Americas region.

Based on market analysis, we are keeping our industry growth forecasts unchanged ahead of the upcoming earnings season. Our next 12 months and following 2-years industry forecasts are at 2.8% and 1.9% respectively, based on both secular and cyclical factors. The main reason for keeping our NTM industry growth forecast constant at 2.8% is essentially global “politics” offset by some pockets of cyclical easing in long suffering verticals like Public Sector and Energy, resources & Utilities. Our near and long term forecasts are based on our ongoing premise that services industry growth is being pressured primarily by significant revenue compression on existing deals in the traditional services segments (i.e., Applications outsourcing, Infrastructure outsourcing, and Business process outsourcing). Moreover, in recent quarters, cyclical demand pressures have impacted discretionary spending primarily in the financial services and healthcare verticals which account for 48% of total industry’s Y/Y growth.

The IT services industry is buffeted by ongoing changes, but the “black-box” nature of the industry makes it difficult for key stakeholders to answer basic – yet crucial – questions. To address these challenges, Everest Group has partnered with DeepDive to develop a systematic methodology to examine detailed industry growth trends, forecast industry & market segment growth rates, and measure & compare performance among major IT services providers.

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