IT services set for gradual recovery in 2024, says Everest Group
TEXAS, UNITED STATES — Everest Group’s latest Forces & Foresight research revealed that the IT services industry is on the brink of a gradual recovery in 2024 after enduring the impacts of the 2008 global financial crisis and the COVID-19 pandemic.
According to Everest Group’s Vice President Prashant Shukla, the path to recovery this time around is expected to be more measured — unlike the sharp rebounds observed after previous downturns — and influenced by a mix of stabilizing factors and emerging demand in specific sectors.
The research highlights three main drivers poised to fuel the IT services sector’s recovery:
- Stabilizing Base: Signs of spending stability are emerging, with over 60% of enterprises planning to increase technology budgets in 2024. Software as a service (SaaS) and Platform as a service (PaaS) players report double-digit growth and anticipate continued expansion, signaling a firm foundation for recovery.
- Fixing Revenue Leakage: Service providers have faced discrepancies between revenue growth and bookings attributed to longer deal terms, delayed commitments, and slow ramp-ups. However, recent quarters show signs of stabilization, particularly among mid-tier players, suggesting a shift towards positive revenue contributions from bookings.
- Pockets of Additional Demand: Specific growth areas identified for 2024 include rising cybersecurity demand, stronger engineering research and development (ER&D) demand in industries like automotive, and continued growth in data and analytics driven by AI advancements. Additionally, sectors such as investment banking and high-tech, along with the North American market, are showing signs of a turnaround.
However, Everest Group’s research cautions that while the potential of generative AI is acknowledged, its scaled adoption is expected to take time, with minimal impact on this year’s growth.
For IT service providers, the key to navigating the recovery lies in identifying and capitalizing on “early recovery pockets” rather than adopting a defensive stance.
With a diverse mix of industry verticals and geographies undergoing various recovery cycles, the scenario presents both challenges and opportunities for strategic growth and investment.
As the industry prepares for a more gradual recovery, Everest Group said that the focus will be on leveraging technology for growth, stabilizing demand, and tapping into specific segments poised for expansion in 2024.
