Worldwide revenues for IT Services and Business Services totaled $502 billion in the second half of 2017 (2H17), an increase of 3.6% year over year (in constant currency), according to IDC (www.idc.com). Revenues came to just shy of the $1 trillion mark, adds the research group.

IDC expects 2018 revenues to cross this threshold. Year-over-year growth was around 4%, which slightly outpaced the worldwide GDP growth rate. The above-GDP-growth reflects stronger business confidence bolstered by a brighter economic outlook, a shared sense of urgency for large-scale digital transformation, and, at least in certain pockets and segments, new digital services beginning to offset the commoditization of traditional services.

Looking at different services markets, project-oriented revenues continued to outpace outsourcing and support & training, mainly due to organizations freeing up pent-up discretionary spending from earlier years and feeling the need to “digitize” their organizations via large scale projects. Specifically, project-oriented markets grew 4.6% year over year to $186 billion in the second half of 2017 and 5% to $366 billion for the entire year. Most of the above-the-market growth came from business consulting: its revenue grew by almost 7.8% in 2H17 and 8.2% for the entire year to $115 billion. 

In large digital transformation projects, high-touch business consultants continue to extract more value than mere IT resources do. Most major management consulting firms posted strong earnings in 2017.

IT-related project services, namely custom application development (CAD), IT consulting (ITC), and systems integration (SI), still make up the bulk (more than two thirds) of the overall project-oriented market. While slower than business consulting, these three markets showed significant improvement over the previous year: CAD, ITC, and SI combined grew by 3.7% year over year to $251 billion for the full year 2017. IDC believes that some 2015 and 2016 projects were either pushed out to or only started ramping up in 2017, which helped to drive up spending in 2H17. 

This coincides with the strong rebound on the software side as IT project-related services are largely application driven. Because large digital projects not only drive up “new services” but also pull in “traditional services,” IDC believes that the actual volume of IT project services grew even faster in 2017 but was offset somewhat by lower pricing.

“As customers look to digital transformation initiatives to stay relevant in the new economy, vendors face both opportunities and challenges,” says Xiao-Fei Zhang, program director, Global Services Markets and Trends. “While automation and new cloud delivery models reduce overall price, new digital services will require clients to spend more time and resources to modernize their existing IT environment,”