Spending by midsize companies will increase by 52% by 2026, global management consultancy Oliver Wyman says:
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The digital transformation of midsize companies represents a significant business opportunity for the IT service provider industry, concludes a new report from global management consultancy Oliver Wyman.
The company estimates that investments in digital transformation by companies in this segment will grow 8.8% annually between 2021 and 2026, which is higher than the 7.6% annual increase for the total market.
That means total spending on IT services for businesses with annual revenues from £0.4 to £4.2 billion will increase by 52% to £84 billion by the end of the five years. By comparison, the broader market is tipped to grow by 44%.
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Samir Javeri, Partner at Oliver Wyman, said the pandemic has prompted many companies to accelerate their transformation to the cloud, address growing cybersecurity requirements and modernize their applications.
“To date, more than 50% of mid-market customers have chosen to manage IT primarily in-house due to concerns about protecting sensitive data and the cost benefit,” he explains. “However, many of them are now having trouble managing the full extent of the transformation journey with internal resources.
“As a result, they are increasingly turning to third-party vendors for help, especially mid-market customers, who find it more challenging to attract talent in an environment with a general shortage of IT resource experts.”
In 2021, European medium-sized companies invested more than £55 billion in IT services, accounting for 28% of the total £194 billion spent by all companies in Europe.
In the UK, businesses spent £15 billion on IT services last year, with telecoms and financial services leading the way at £4.8 billion and £3.4 billion respectively.
Loyalty in the mid-market
Overall, the survey concluded that midsize companies have a “higher degree of adherence to their IT service providers,” with the lower end of the segment tending to be loyal. In fact, only 4% of them turned out to have switched from top two providers in the past two years.
By comparison, larger organizations were more likely to switch suppliers, with 20% switching to one of their top two at some point during the same period.
“With a shortage of technical talent in the market, the answer is not that the winner gets everything, as the ecosystem will suffer,” says Javeri. “IT service providers have the opportunity to be part of the solution by supporting the internal capacity building and upskilling that the market is increasingly focusing on.
“Not only will this be a valuable differentiator and source of work in the short term, but in the longer term it will enable growth and progress across the board.”
© Dennis Publishing
