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ANZ IT Services Market Growth Dampened By COVID-19 In 2020, But IDC Says A 2021 Recovery Is On The Horizon

The Australia and New Zealand (ANZ) IT & Business Services market grew by 1.7% year on year (YoY) in 1H20 (January-June). This represents a significant slowdown in the pace of annual growth in the region. In comparison, 2019 saw 4.4% YoY growth across ANZ's IT & Business Services markets.

Emily Lynch, Associate Market Analyst for ANZ IT Services states, "The resurgence of COVID-19 in both countries forced ANZ organisations to adapt to purely digital ways of working and doing business. 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".

IDC classifies the IT Services market into three primary markets – Project-Oriented, Managed Services, and Support Services. For 1H20, managed services registered the highest growth across the region, followed by project-oriented services and support services.

The managed services market showed resilience to downturn across ANZ. Within this market, hosted infrastructure, hosted application and network management services experienced heightened activity. This comes as businesses are forced to adjust to new ways of working during COVID-19, with significant reliance on network, connectivity, and endpoint solutions to ensure business resiliency.

COVID-19 accelerated e-commerce, driving the need for customised and hosted applications for online purchasing. The acceleration in adoption of multi- or hybrid cloud strategies leads to organisations relying on managed cloud services providers to manage more complex environments, also lending resilience to the cloud hosting infrastructure space.

According to IDC's Worldwide Semiannual Services Tracker, IDC forecasts the ANZ market to reach US$25.3 billion by the end of the year. While growth in 2020 was suppressed due to the impacts of COVID-19, IDC expects a robust market recovery in 2021. As market activity gathers momentum through 2021, IDC predicts that 2.8% YoY growth will see the ANZ IT & Business Services market reach just over US$26 billion.

Growth is expected to be strongest across both Australia and New Zealand's project-oriented services markets. IDC forecasts Australia and New Zealand's project-oriented services markets to see a five-year CAGR of 2.2% and 2.6% respectively during 2019-2024.

Lynch adds, "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. However, COVID-19's forced acceleration of businesses' digital maturity will increase investment across major transformational, consulting, and integration projects."

Key priorities in ANZ's project-oriented services space 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.

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