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Demand for Digital Technologies Will Fuel Continued Growth of IT Services in 2017 | Press Release

By | Press Releases

Global services market growth rate expected to decline in 2017 for the fourth straight year, hampered by political uncertainties, macroeconomic slowdown.

The growing demand for innovative and digital technologies will spur continued growth of the IT services segment of the global service market in 2017, according to Everest Group. The number of new delivery centers focusing on development of digital services increased 177 percent between 2013-14 and 2015-16. The largest digital services growth segments during this period included cloud, Internet of Things (IoT) and big data.

The global services market has witnessed a significant increase in the share of IT service delivery since 2012 (up by 7 percentage points, from 32 percent to 39 percent), while the share of business process services has declined consistently in the same period (down by 4 percentage points, from 46 percent to 42 percent). Currently, of the US$173-178 billion global services market, IT services have a 39 percent share, with business process services and engineering/R&D services commanding 42 percent and 19 percent, respectively.

Overall, the global services locations landscape continued to experience stable growth in 2016 in terms of revenue; however, the growth rate was slower in 2016 (7 to 9 percent) than the previous year (8 to 10 percent). Similarly, the growth rate of center setups dropped in 2016 in comparison to 2015.

“Going forward, we expect that the global services market growth rate will decline in 2017 for the fourth straight year, measuring 6 to 8 percent,” said Anurag Srivastava, vice president and director of the Global Sourcing practice at Everest Group. “Some of this is due to the direct impact of the macroeconomic slowdown. Other dampening factors will include the political instability associated with Brexit in the United Kingdom and the review of the H1-B visa program in United States. Volatility in equity and investment markets and currency fluctuations will hamper the growth rate as well.”

These findings and more are discussed in Everest Group’s recently published report “Global Locations Annual Report 2017: Signs of Structure in a Disordered World.”

This research offers insights into the size and growth of the global services market, global services exports by regions and country, an update of locations activity by region and country, and trends and risks affecting global locations. It also provides industry-leading comparison and analysis of key changes in maturity, arbitrage and potential of global delivery locations through Everest Group’s unique MAP Matrix™ analysis.

***Download complimentary report abstract here***

Other key findings:

  • In terms of revenue, Asia Pacific continued to hold the largest share (more than 60 percent) of the global services market, followed by Nearshore Europe, Latin American and the Caribbean, and Canada.
  • In terms of headcount, India and the Philippines continue to be the leading delivery locations, accounting for 66 percent of the share, followed by Canada, China, Poland and Ireland.
  • India and the Philippines held more than one-third of the share of the new delivery center setups in 2015-16.
  • Most onshore locations are expected to see an increase in the near future in terms of delivery setups by the top 20 service providers.
    • The United States’ share in terms of onshore delivery center setup activity is expected to increase due to likely changes in U.S. visa regulations, which could make hiring of offshore resources difficult; increasing emphasis to hire locally; and greater focus on delivery of non-traditional functions, such as digital.
    • England’s share has witnessed a significant decline in the past few years; however, its share is expected to increase once investor apprehensions about Brexit decline.
    • Continental Europe is also expected to witness an increase in its share, due in part to the direct impact of Brexit and players moving out from England. Additionally, many cities in the region are being leveraged to develop new digital technologies for global delivery.