Global IT service industry to reach $2 trillion by 2028

The global IT service industry is set to hit a spend of $2 trillion over the next five years, according to a new report by market research firm Forrester. Titled ‘Global IT Services Market Forecast 2023-2028’, the report predicts an average annual growth rate of 4.6%. However, it's not all rosy pictures, as Forrester also anticipates several challenges on the horizon for IT companies.

These challenges include keeping a healthy headcount, confronting heightened competition from software and engineering firms, and grappling with the impacts of generative AI (GenAI). Consequently, the report forecasts that worldwide GDP growth will only succeed in surpassing pre-pandemic levels in 2025.

Several key findings were highlighted in the report. For example, growth rates are projected to be the fastest in the Asia-Pacific region, soaring to almost 6%. However, this will be mainly driven by the financial services sector, managed services and cybersecurity. Remarkably, ten of the largest IT service companies racked up a staggering 44% of their revenues from financial services, manufacturing, and energy.

The IT Infrastructure-as-a-service (IaaS) sector is expected to undergo the most significant growth, almost doubling its share of the IT services market by 2028. This represents an increase from 8% in 2022 to a substantial 15% in 2028. The report attributes this surge to the continued expansion of major hyperscalers such as Google Cloud and AWS.

Forrester warned that IT service companies will need to adeptly calibrate their talent supply to meet demand to cope with predicted tepid growth in 2024. The report noted that many firms had bolstered their headcount to cope with increased demand during the pandemic but are now having to cut jobs.

GenAI's influence on how services are delivered was another theme identified by the report. According to Forrester, in the US, 57% of the jobs lost to automation in professional services will be due to GenAI. If properly implemented, genAI could increase IT service productivity and reduce project delivery costs, which would free up more resources to tackle project backlogs.

"The IT service industry captures more than a third of annual global tech spend. By 2028, the annual spend will increase significantly to reach $2 trillion,” said Michael O’Grady, principal forecast analyst at Forrester. He added, "Despite strong forecasted growth over the next few years, IT service firms must stay ahead of current challenges, including optimizing headcount for cost and efficiency, staying abreast of competition from software and engineering firms, and utilizing genAI judiciously to reshape service delivery. IT service companies that manage these challenges well will thrive and scale globally." The full forecast and analysis are detailed further in the report.