Report estimates new and untapped £84bn mid-market opportunity for European IT Service Providers
Even before the Pandemic companies were already aware of the benefits of cloud migration which include enhanced security and easy business scalability. However, it was after the Pandemic hit that a lot of businesses realised the true power of integrating cloud services into their infrastructure.
Businesses that adopted the cloud were more resilient to the disruptions brought by the pandemic. As a result, there has been a significant increase in businesses investing in digital transformation, especially in the mid-market segment.
In 2021 alone, all companies in Europe spent £194 billion on IT services and mid-market companies accounted for about 28% of that money with an estimated expenditure of over £55 billion.
Now, according to a new report from global management consultancy Oliver Wyman, the spending of mid-market companies on IT services is expected to rise at an annual rate of 8.8% between 2021 and 2026. That’s more than the 7.6% estimated annual increase in investment by all the companies in Europe.
To break down that further, companies with annual revenue of £0.4 to £4.2 billion which make up the mid-market will increase their average spending on IT services by 52% totalling £84 billion by 2026. In contrast, the overall market will grow by 44%.
This is a key business opportunity that IT service providers can step in to fill especially because, for the longest time, many mid-market companies have relied on in-house IT management.
“Until now, more than 50% of mid-market customers have opted to manage IT primarily in-house, due to concerns about protecting sensitive data and the cost advantage,” explains Samir Javeri, Partner at Oliver Wyman. “However, many of them now face difficulties in managing the full extent of the transformation journey with in-house resources.”
The truth is that the typical in-house IT department for these mid-market companies lacks the necessary expertise to flawlessly oversee the organisation’s digital transformation. It also doesn’t help much that there is a shortage of IT resource experts in the market. The companies are, therefore, left with no choice but to hire external IT service providers.
The report also suggests that mid-market companies are more loyal to their service providers which may be another reason for IT vendors in this market segment to be excited.
According to the study, only 4% of the mid-market companies changed their top two providers in the last two years. In contrast, larger organisations were found to be more likely to change providers with 20% dropping one of their top two vendors at some time over the same period.