In our Everest Group forecast for the services industry earlier this year, we predicted deceleration from 3.2 to 2.8 percent in the broader services market and deceleration from 7.1 to 6.8 in in the Indian market. We see no reason to change that prediction of deceleration now. But something notable has happened since we made the prediction: a deceleration in Accenture’s earnings in the consulting and systems integration areas. This is puzzling at first glance but highly significant of a major trend.
We would have expected that we would increase our earlier industry forecast, given two factors:
- Powerful new digital technologies now coming of age that are ready for adoption and should drive a wave of adoption and new spending
- A buoyant US and global economy that has increased consumer spending, further driving discretionary services spend
However, we see negative trends due to the insecurity caused by what I refer to as the “Trump Dump” in America and by Brexit in the UK. The Trump Dump is the politically difficult environment causing companies’ reticence or unwillingness to commit to large projects with offshore labor. We’re consistently seeing projects delayed, postponed or cancelled. This puts companies in a bind because there simply isn’t sufficient domestic talent to drive large initiatives.
The US represents almost 50 percent of the global services market. We believe the Trump Dump will have a negative effect on the broader services industry, creating impacts beyond just the Indian segment of the market. Therefore, we believe there are significant reasons for caution in forecasting market growth.