A/NZ IT and business services market recovery on the horizon

A/NZ IT and business services market recovery on the horizon

Market could top US$26 billion next year

Credit: Unsplash

This year may have been a doozy for the IT and business services market in Australia and New Zealand, which weathered a substantial slowdown in terms of year-on-year growth, but 2021 could bring with it renewed vigour. 

While the local IT and business services market has done a heck of a lot better than plenty of other industry sectors in Australia and New Zealand, industry analyst firm IDC claims that it grew by just 1.7 per cent, year-on-year, in the first half of 2020, from January to the end of June.

By comparison, 2019 saw 4.4 per cent year-on-year growth across the A/NZ IT and business services markets, so the first half figures for this year represent a significant slowdown in the pace of annual growth in the region.

But despite the slowdown, there were some bright spots in the IT services market, which IDC classifies into three primary segments: project-oriented, managed services and support services. 

In the first half of this year, managed services registered the highest growth across the region, followed by project-oriented services and support services.

Indeed, the managed services market showed resilience to downturn across Australia and New Zealand. 

Within the managed services market, hosted infrastructure, hosted application and network management services experienced heightened activity, according to IDC.

Needless to say, this heightened activity emerged as businesses adjusted to new ways of working during COVID-19, with significant reliance on network, connectivity and endpoint solutions to ensure business resiliency.

Looking at the broader market, COVID-19 accelerated e-commerce, driving the need for customised and hosted applications for online purchasing. 

Moreover, the acceleration in adoption of multi- or hybrid-cloud strategies has led to organisations relying on managed cloud services providers to manage more complex environments — a factor injecting resilience into the cloud hosting infrastructure space. 

All up, IDC’s forecasts suggest that the A/NZ market could reach the equivalent of US$25.3 billion by the end of the year, a figure that reflects a growth rate tempered by the influence of the pandemic.

According to IDC A/NZ IT services associate market analyst Emily Lynch, the disruptions delivered by the pandemic resulted in both positive and negative ramifications for the IT and business services market, with long-term business recovery goals expected to result in an overall positive trend next year.

"The resurgence of COVID-19 in both countries forced A/NZ organisations to adapt to purely digital ways of working and doing business,” Lynch said. “This impacted spend on discretionary services and large transformational projects, but accelerated investment in tools and solutions to enable this adjustment. 

“Businesses are positioning themselves for post-pandemic recovery and strengthening their digital resiliency,” she added. 

While growth in 2020 was suppressed due to the impacts of COVID-19, IDC expects a robust market recovery in 2021. 

The analyst firm predicts that the A/NZ IT and business services market will see 2.8 per cent year-on-year growth, to reach just over US$26 billion.

IDC reckons that growth will be strongest across both Australia and New Zealand's project-oriented services markets, which are forecast to see a five-year compound annual growth rate (CAGR) of 2.2 per cent and 2.6 per cent, respectively, during 2019-2024.

Key priorities in A/NZ's project-oriented services space, according to IDC, include business continuity and crisis management consulting services, network and connectivity resiliency and accelerated cloud investments as businesses look to reposition themselves for growth in the recovery from COVID-19. 

"The project-oriented market took a major hit as large projects were put on hold or cancelled while businesses weathered the initial outbreak of the pandemic and sought to reduce costs wherever possible,” Lynch said. 

“However, COVID-19's forced acceleration of businesses' digital maturity will increase investment across major transformational, consulting and integration projects."

IDC's latest research follows recent findings by fellow industry analyst firm Gartner, which suggested in October that digital innovation budgets among enterprises across A/NZ are expected to an increase in growth next year.

While 54 per cent of chief information officers (CIOs) in Australia and New Zealand surveyed in a study by Gartner revealed an increase in spending this year, two-thirds said they expect it to increase in 2021.

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