Looking at different services markets, project-oriented revenues (i.e. consulting, integration, application development, etc.) continued to outpace outsourcing and support & training. They grew by 6.4% year over year in 2H18 to $194 billion and 5.8% to $380 billion for the entire year. The growth was led largely by business consulting and application development markets. Business consulting grew 9.1% to $63 billion in 2H18 and 8.3% to $123 billion for the year. Custom application development (CAD) grew 8.3% to almost $24 billion in 2H18 and 7.5% to $46 billion for 2018 (compared with only 5.1% in 2017). Market growth was largely due to strong results in the United States. As traditional U.S. enterprises and government agencies continue to tackle and adopt digital transformation, strategic consulting remains critical in larger projects. Digital transformation is also driving up new application development work - not just "new apps" but also upgrading "legacy apps." The accelerated growth in CAD coincides with the strong rebound on the software side.
In managed services, revenues grew 3.8% to $240 million in 2H18 and 3.6% to $473 million for 2018, which is on par with real worldwide GDP growth. Application-related managed services revenues (hosted and on-premise application management) outpaced infrastructure and business process outsourcing (BPO), growing by 5.8% to $41 billion in 2H18 and 5.6% to $80 billion for 2018. Like application project work (CAD), application outsourcing serves as a vehicle for buyers to access new app skills (i.e. cloud, analytics, machine learning, etc.), as well as modernizing legacy apps via external providers. IDC (News - Alert) expects application-related managed services to continue to out perform other outsourcing segments.
"More sustained U.S. economic growth, at least compared to other mature economies, allowed large government agencies and traditional businesses to spend more on new projects in recent years," said Xiao-Fei Zhang, program director, Global Services Markets and Trends. "Additionally, digital disruption and global competition have also stoked their digital fear - go digital or go broke."
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