Extensive study of true growth (organic, constant currency) across 19 IT services market segments indicates that the market grew by 2.1% Y/Y in the quarter ending March 2017, which is 2.4 percentage points lower than same period in 2016. The Y/Y deceleration was driven by growth deceleration in Infrastructure Outsourcing service line, Public sector vertical and Europe region.

On a Q/Q basis (i.e., from December 2016 to March 2017), industry growth decelerated by 1.1 percentage point, down from 3.2%. Our Y/Y change in growth analysis reveals main weakness trending for the Infrastructure Heritage services firms. The organic, constant currency growth of the Infrastructure Heritage firms decelerated 3.0 percentage points annually. Similarly, the large Indian players’ growth has decelerated by 3.2 percentage point annually. Midsized players and Systems Integration Heritage players decelerated by 2.1 percentage points and 1.8 percentage points, respectively.

Based on market analysis, we are revising up our next 12-months (NTM) forecast by 0.1% to 2.9%. We are keeping our following two years forecast unchanged at 1.9%. The bases of our forecasts encapsulate both secular and cyclical factors as observed from shifts in leading indicators as well as buyer behavior and their 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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IT Services Forecaster