German IT service providers, which posted strong growth in 2015, expect to see the upward trend in business continue in 2016 and beyond.
An annual study on the state of the German market for IT consultancy and services found that the 95 biggest IT service providers in the country boosted revenue 7.5 pc last year to 28.1Â billion euros.
The increase reflected first and foremost a sharp rise of 8.9 pc in revenue for IT consultancy and system integration companies.Â Revenue for companies providing services, which include traditional outsourced activities such as data center and applicationÂ management, increased only 2.7 pc in 2015.
Luenendonk, the market research firm that puts together the study, said the overall growth resulted from client companies'Â continued high investments in the modernization of IT processes and their need to development digital innovations and business models. "Companies are increasing their IT budgets ever more," said Luenendonk partner Mario Zillmann.
"The strong growth of IT consultants and systems integration companies results in first place from the high customer demand for support with digital transformation projects," Zillmann said at a press briefing. When companies implement their digitization strategies, he added, they are in particular looking for help with their IT strategy, app development and testing.
The slower growth registered for providers of operational IT services underscored how efficiency improvements and outsourcing to lower-cost locations are putting downward pressure on prices. That's particularly visible in areas such as data-center management and the falling cost of runningÂ IT applications.
The Luenendonk top 10Â listings for companies providing consultancy services and system integration in Germany, showed Accenture in first place, followed by IBM, T-Systems, Capgemini and Atos. A newcomer in the top 10 was NTT Data.
The list of top 10 companies providing IT services was led by Aareon, followed by Atos, Bitmarck, BWI and Cenit.
For 2016, the 95 top IT consulting and systems-integration companies expect growth of 11.9 pc, while companies providing traditional IT services see their business grow 5.3 pc. Those expectations exceed their average forecasts for market growth, which they put atÂ 4.6 pc and 3.3 pc for the respective sectors.
"Most companies tend to always expect stronger growth than the market," said Luenendonk partner Hartmut Lueerssen.
Companies polled generally cited a lack of qualified recruits as one of the biggest problems they face in realizing growth targets. In 2015, the Luenendonk study found, on average 17.5 pc of positions continued to be open. "The fact that one in five positions isn't filled is clearly an issue," Zillmann said, adding: "It's an open question how service providers will solve this problem."
Most German companies don't expect government policies to help reduce the shortage of skilled IT specialists and the country's industry expects demand for big data, cloud, web development and other digital skills to continue to exceed supply in the next three years. Said Zillmann: "Companies don't trust the politicians to solve their recruiting issues."
Nevertheless, consulting and systems integration specialists expect business to grow 13.0 pc in 2017 and 11.6 pc between 2018 and 2020. Traditional service providers expect 4.9 pc more business in 2017 and 5.6 pc more in the 2018 to 2020 period.
Some other highlights from Luenendonk's annual market study:
- IT security, business analytics and the integration of digital solutions into existing IT systems are the top services German companies demand of IT service providers. Automation and big data are in fourth and fifth place, respectively
- Digital transformation is the main focus of IT investment, with very high demand cited for the modernization of existing IT systems
- Companies feel that service and customer supportÂ are most affected by digitization, followed by manufacturing, logistics, IT and marketing
- Â Banks, automakers and telecommunications companies are the three biggest customer groups for IT consultants in Germany.