Due to the pandemic, worldwide IT and business services revenue declined 1.9% year over year (in constant currency) during the first half of 2020 (1H20), according to the International Data Corporation (IDC) Worldwide Semiannual Services Tracker. IDC estimates services revenue fell below $500 billion (in constant currency) in 1H20. Taking into account the strengthening dollar, the actual decline was 3.7% yoy.
Some key insights from IDC:
- IDC forecasts the market to continue to decline throughout the year, however, the near-term outlook is less pessimistic than a few months ago. The June market forecast update projected the market to decline 2.8% for 2020. The current forecast tempers that to just a 2.3% decline.
- The forecast growth rate for 2021 has also been increased by 500 basis points, from 1.4% to 1.9%, reflecting optimism for a quicker and stronger recovery.
- IDC’s view on the supply side remains intact. Most services providers have helped their clients’ employees transition to working from home without major hiccups. As most providers expect to continue remote working throughout the year and even well into 2021, productivity and potential employee burnout remain a top challenge and concern for leadership. IDC believes that the short-term financial impact will be limited.
- The demand-side shock was indeed severe and immediate. Most large global vendors, including top Indian services providers, saw their second quarter reported revenue growth reduced by at least a few percentage points from pre-COVID-19 levels.
- Some vendors are reporting strong bookings in the second quarter and more active pipelines despite declining revenues. Sales teams are adopting quickly to virtual B2B selling and taking advantage the expanded “mind-share” of senior business leaders (more time or freed up due to no travelling/commuting and more open-minded to new ideas and new ways of doing things, unlocked by the crisis). This has already contributed to large deal making in the third quarter. Most vendors believe that in the long run the crisis is a net-positive with the COVID-19 crisis tipping organizations and consumers over to the digital world.
- From a regional perspective, IDC’s outlook for the US services market is slightly more pessimistic, but improved for several major international markets, including Europe and China.
- In the Americas, the services market is forecast to contract 2.7% in 2020, a slight improvement from the 2.3% contraction in the June update.
- The forecast for Europe received significant upward adjustments in this forecast update. While the Euro area GDP is still projected to shrink by more than 8% this year, it is less severe than previously expected.
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