For IT service providers, 2020 was one of the most challenging years for revenue growth. Their profitability fell as organisations resorted to cost optimisation amid the Covid-19 crisis.
According to analysis by GlobalData, a leading data and analytics company, 50% of the top 20 IT service providers by revenue reported YoY revenue decline in 2020, while nine saw a drop in net earnings.
Keshav Kumar Jha, business fundamentals analyst at GlobalData, comments: “Conditions could remain challenging for IT service providers as cost-optimization strategies necessitated by the Covid-19 pandemic will likely become long term. However, IT infrastructure and application outsourcing service providers may benefit considerably from the digital transformation adopted by organisations amid the health crisis.”
Gary Barton, principal analyst for business network and IT services at GlobalData, states: “Many IT companies have experienced customers delaying IT transformation projects as enterprises struggle to understand what their businesses will look like in terms of new working practices after the pandemic. There is an opportunity for IT companies to engage with enterprises and help them build the business models of the future – the IT companies who seize this opportunity will be well placed to grow revenues.
“There is also a lot of faith being put in new technologies such as 5G, IoT and edge networking/compute to generate new IT revenue growth. The use cases for these technologies are still being developed, but there are clear rewards for IT companies that can demonstrate clear business/consumer benefits of these technologies.
“Finally, there are signs that smaller businesses are becoming more attuned to the benefits of being more digital. Funding schemes such as NextGenerationEU are providing potentially billions of Euros to help enterprises adopt new technologies and this spending will benefit IT providers.”