IDC is now forecasting a 2.8% decline in worldwide IT services and business services this year due to COVID-19, however, the forecast is calling for a 1% to 1.4% uptick in 2021.
In April, IDC predicted this market would decline 1.1% in 2020, so the new forecast is more pessimistic.
IDC said the newest forecast is based on the Economist Intelligence Unit's May forecast for worldwide GDP in 2020, which will likely contract by around 4.4%, more than twice as much as the March forecast. After almost four months of shutdowns across most developed markets, the economic downturn in the first half of 2020 will be so severe that even a robust recovery in the next six months will not offset it.
"Over the last few months of shutdowns around the world, services providers have largely shifted clients' core IT and business operations to 'work from home' environments relatively overnight without major hiccups," said Lisa Nagamine, research manager with IDC's Worldwide Semiannual Services Tracker. "This further demonstrates how adaptive and resilient vendors and buyers can be in the 'digital age'."
"We will continue to see the services market growth outpace GDP growth, even during a crisis like this," said Xiao-Fei Zhang, program director, Global Services Markets and Trends. "The pandemic is clamping down on discretionary spending, and puts the brake on many projects for now, but this will be somewhat cushioned by managed services and support services contracts that support core operations of large enterprises and government agencies."
Some additional highlights from IDC:
- The Americas services markets are now forecast to decline 2.5% year over year in 2020, compared to the March forecast of nearly flat growth.
- IDC lowered the US growth forecast to -2.7% in 2020. The project-oriented markets, particularly business consulting, bore the brunt as large US consultancies have already announced workforce reductions worldwide.
- IDC also tempered the 2020 outlook for managed services by roughly 1%, now down 1.6%. The outlook for the support services market is unchanged and remains at -1.0% with growth in hardware and software support offset by sharp declines in training and education.
- Services markets in Canada also saw a sharper decline in 2020 and weaker recovery is expected across most foundation markets in the coming years, reflecting the gloomier economic outlook as the shutdown drags on.
- Latin America will continue to grow but will slump to less than 2% for 2020 with the outlook remaining unchanged from the March forecast.
- Western Europe will decline 5.2% year over year in 2020 moved downward by almost one percentage point from the March forecast.
- Central & Eastern Europe's 2020 short-term outlook was lowered while the mid- and long-term growth improved.
- The Middle East & Africa market will contract by more than 5% in 2020 as major markets in the region are also flanked by shutdowns and the collapse in oil prices.
- Japan will contract this year by 2.8% in 2020, revised downward by more than 1 percentage point with more economic metrics, such as weaker consumer spending in April and May, pointing to a weaker economy.
- IDC still expects the China market to deliver growth of 2.7% for 2020.
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