The Australia and New Zealand IT and business services market grew by just 1.7 percent year on year in the first six months, according to analyst firm IDC. But the firm predicts a rebound in the coming months.
This is less than half the 4.4 percent growth that the analyst firm tracked in 2019.
The figures were revealed in the latest installment of IDC’s semiannual service tracker, which considers projects, managed services and support contracts across the region. IDC attributed the drop to lockdowns earlier in the year.
"The resurgence of COVID-19 in both countries forced ANZ organisations to adapt to purely digital ways of working and doing business,” IDC associate market analyst Emily Lynch said.
“This impacted spend on discretionary services and large transformational projects, but accelerated investment in tools and solutions to enable this adjustment.
“Businesses are positioning themselves for post-pandemic recovery and strengthening their digital resiliency".
For each of the segments tracked, managed services registered the highest growth across the region, followed by project services and support.
IDC said managed services showed resilience to downturn across ANZ. Hosted infrastructure, hosted application and network management services were the best performers for MSPs.
The analyst firm said the period saw from customers an increased reliance on network, connectivity, and endpoint solutions.
IDC said e-commerce also saw a boost, driving the need for customised and hosted applications for online purchasing. The move to cloud saw managed cloud services providers take on more complex environments, also lending resilience to the cloud hosting infrastructure space, the firm said.
Looking forward, the ANZ market will reach US$25.3 billion by the end of the year, IDC said. The firm predicted a “robust market recovery in 2021 and that the market will see 2.8 percent year on year growth next year and hit US$26 billion.
The firm predicted projects would rebound and the project-oriented services market would see a five-year CAGR of 2.2 percent in Australia and 2.6 percent in New Zealand during 2019-2024.
"The project-oriented market took a major hit as large projects were put on hold or cancelled while businesses weathered the initial outbreak of the pandemic and sought to reduce costs wherever possible,” Lynch added.
“However, COVID-19's forced acceleration of businesses' digital maturity will increase investment across major transformational, consulting, and integration projects."
IDC said the key priorities for project-oriented services include business continuity and crisis management consulting services, network and connectivity resiliency and accelerated cloud investments as businesses look to re-position themselves for growth in the recovery from COVID-19.