Global IT Services Spend Will Reach $2 Trillion by 2028

Here's what IT services firms must do to overcome the challenges they are facing.

ITPro Today

May 6, 2024

3 Min Read
man stacking coins next to laptop

The IT services industry is often overlooked, even though it captures more than a third of annual global tech spend — some four times the annual spend on computer equipment. Forrester forecasts that by 2028, annual spend on IT services will reach $2 trillion. Despite this forecasted growth, IT services firms face challenges in the next few years, including retaining talent and balancing headcount with increased competition from software and engineering firms and the effects of generative AI.

Growth Is Substantial, Driven by 16% IaaS CAGR to 2028

Overall, the IT services industry will average 4.6% annual growth, with infrastructure as a service (IaaS) averaging annual growth of nearly 16%. Growth will be fastest in Asia Pacific, reaching almost 6%. In the near term, growth will be driven by:

  • Financial services and manufacturing. Ten of the largest IT services companies saw 44% of their revenues come from financial services, manufacturing, and energy. The growth opportunity is significant: Accenture estimates that only 5% of manufacturing and engineering services companies scale mature digital capabilities across their organization.

  • Managed services. Infrastructure as a service will nearly double its share of the IT services market — going from 8% in 2022 to 15% in 2028. The largest hyperscalers will enjoy the biggest growth. Google Cloud and AWS had 26% and 13% growth in 2023, respectively, with Azure and other cloud services growing 17% for Microsoft.

  • Cybersecurity. Canalys estimates that two-thirds of the $224 billion in cybersecurity spend in 2024 will be for IT services in consulting, outsourcing, managed services, solution deployment and integration, maintenance, and support.

IT Services Firms Must Stay Ahead of Current Challenges

Despite strong forecasted growth in the market in the next five years, IT services firms predict weak results for 2024. Only in 2025 will real global GDP growth (a strong predictor of IT services growth) exceed pre-pandemic levels. As a result, the IT services industry in 2024 will need to manage:

  • Headcount vis-à-vis automation. IT services firms grew headcount to match supercharged pandemic demand, but many are now cutting jobs. Since headcount and revenue have been in lockstep, they must ensure that such cuts do not harm the bottom line. To improve margins, many are considering the productivity gains of automation, but most benefits are still unrealized.

  • Competition from software and engineering firms. Engineering and IT services firms are competing to increase their share of IT services revenue, especially in consulting, security, maintenance, digital, and networking. IT services firms are also nurturing closer collaboration with the software industry: For example, Cognizant's purchase of Thirdera strengthens its strategic partnership with ServiceNow for AI-driven automation.

  • Generative AI in terms of how it reshapes the way that services are delivered. Fifty-seven percent of the jobs lost to automation in professional services in the US will come from generative AI. If genAI increases IT service productivity to lower project delivery costs, more resources would be available to reduce project backlogs. Project onshoring could become more popular as parts of consultant jobs become semiautomated.

IT services companies that thrive will scale globally, adapt regionally, and add value through skills and capabilities across government, industry, and defense. For Forrester's recommendations about IT services firms' growth levers and a deeper dive on the $2 trillion of annual IT services spend, read the new report, Global IT Services Market Forecast, 2023 To 2028.

This article originally appeared on Forrester's Featured Blogs.

Sign up for the ITPro Today newsletter
Stay on top of the IT universe with commentary, news analysis, how-to's, and tips delivered to your inbox daily.

You May Also Like