IT Services Forecaster™ Summary Findings and Latest Forecasts

12 May 2017
by Jimit Arora, Rod Bourgeois

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, which is at par for the same duration in 2015. The YOY deceleration experienced in consulting & systems Integration service line, banking, financial services & Insurance vertical and the European region were offset by YOY acceleration in infrastructure outsourcing service line, public sector vertical and the Americas.

On a QOQ basis (i.e., from September to December 2016), industry growth accelerated by 0.2 percentage point, up from 3.1%. Our YOY change in growth analysis reveals main weakness trending for the large Indian IT services firms. The organic, constant currency growth of the large Indian IT services firms has weakened for six consecutive quarters, dropping from 13.2% in the June 2015 quarter to 7.7% in the December 2016 quarter. Similarly, the midsized players’ growth has decelerated by 0.7 percentage point annually and systems integration heritage players decelerated by 0.1 percentage point. On the other hand, the largest peer group, infrastructure heritage, showed a solid 1.3 percentage point YOY acceleration.

Based on market analysis, we are keeping our industry growth forecasts unchanged ahead of the upcoming earnings season. Our next 12 months and the following two-year industry forecasts are at 2.8% and 1.9% respectively, based on both secular and cyclical factors as observed from shifts in leading indicators as well as buyer behavior and approach to contracting with service providers.

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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