EXECUTIVE SUMMARY

UK
May 2017

IT SERVICES

IT developments are continuing to focus on the mobile and cloud

environments, and the market will expand as the evolution of
technology continues into software-defined components, leading to an
increasingly converged IT infrastructure. Blockchain is also beginning to
redefine database architecture, while artificial intelligence is providing a new
layer for technology interaction.

TERRY LEGGETT
Senior Analyst
 IT SERVICES
Executive Summary
May 2017

The market IT services span computer software, hardware,

Computer technology is now almost ubiquitous in
industry, and demands on IT services have become
widespread. For this reason, major changes in
expenditure are unusual. The situation is further impacted
by trends, such as the migration to the cloud, where
capital-intensive expenditure is being replaced by
ongoing current expenditure. This is disrupting growth,
though there was an overall increase in sales in 2016.
The IT services sector is expected to continue to grow
steadily over the next few years, with even more prolific
prospects beyond the review period as 5G impacts the
UK in 2020/21, creating even more opportunities.(See
Figure 1)
programming, information and data management in any
visual format. IT today offers five vital service packages
that help companies implement, execute, manage and
run their businesses in a more efficient, faster and
profitable way:
• Business process automation
• Information access
• Storage and retrieval
• Customer relations management
• Tools for productivity and performance

FIGURE 1: DEVELOPMENT OF THE UK MARKET FOR IT SERVICES, 2012-16 ACTUAL AND 2017-21 FORECAST

SOURCE: MBD AND TRADE ESTIMATES AND FORECASTS

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 IT SERVICES
Executive Summary
May 2017

There are two major areas of activity that can be defined FIGURE 2: SEGMENTATION OF UK MARKET FOR IT SERVICES, 2012-16
as comprising third-party IT services to implement the
above:

• consultancy

• other information technology and computer services

Consultancy activity has generally continued to be

buoyant in recent years thanks to e-commerce, big data
and cloud computing. (See Figure 2)

The IT consultancy market has grown strongly in recent

years, though growth has now slowed, reflecting intense
competition in the sector and growing uncertainties
in the wider economy, which delayed projects during
2016. The remainder of the market comprises a variety
of outsourcing activities, where development has been SOURCE: MBD ESTIMATES

more erratic, though there has been a continued trend to

outsourcing amid growth in cloud computing.
FIGURE 3: SEGMENTATION OF UK MARKET FOR IT CONSULTANCY, 2016
Systems integration typically involves combining
hardware and software products from multiple vendors.
By using a systems integrator, companies can potentially
configure lower cost, pre-configured components and
off-the-shelf software to meet key business goals,
rather than relying on more expensive, customised
implementations that require original programming or
the manufacture of unique components. Most large
organisations rely on an external contractor for the
programme management of most or all phases of system
development.

IT strategy tends to cover all aspects of technology

management, including cost management, human capital
management, hardware and software management,
vendor management, risk management, and all other SOURCE: MBD ESTIMATES

considerations in the corporate IT environment. (See

Figure 3)

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 IT SERVICES
Executive Summary
May 2017

In addition to consultancy activities, the following table FIGURE 4: SEGMENTATION OF UK MARKET FOR IT OUTSOURCING AND
identifies the segmentation of the other information SERVICES, 2016
technology and computer services sector. It refers to
general aspects of outsourcing and services. (See Figure
4)

The IT services market is highly fragmented by end-use

industry as computer technology and software usage is
almost universal. The retail sector is a major user, while
the agricultural and construction sectors remain low
users. (See Figure 5)

SOURCE: MBD ESTIMATES

FIGURE 5: SEGMENTATION OF THE UK MARKET FOR IT SERVICES BY INDUSTRY, 2016

SOURCE: MBD ESTIMATES

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 IT SERVICES
Executive Summary
May 2017

Market factors FIGURE 6: PROPORTION OF COMPANIES USING BIG DATA ANALYSIS, 2015

There are few accurate estimates of the total stock of Own Social Other
Size of company Geolocation
ICT equipment as the government identifies this stocks data media sources
alongside other machinery equipment and weapons
systems. In 2015, the UK stocks under such a definition 0-9 employees 0.7 2.6 3.8 1.6
amounted to £0.68 trillion, up from £0.44 trillion in 1997. 10-49 employees 2.3 3.8 9.1 4.0
50-249 employees 6.6 7.0 16.0 8.2
A major stimulus to IT investment has been big data, 250-999 employees 13.1 14.6 17.0 11.9
which is increasingly attracting interest from small 1,000+ employees 24.8 23.0 30.8 20.8
companies, though the vast majority of users remain
larger companies. Big data is derived from a multitude of SOURCE: ONS

sources. (See Figure 6)

There has been strong and consistent growth in cloud FIGURE 7: COMPANIES WITH HOSTED OR CLOUD-BASED SERVICES, 2010-15
adoption by companies, according to the Cloud Industry
Forum, which surveyed 250 IT decision-makers across
the industry: (See Figure 7)

Companies

The IT consultancy sector comprises both large,

international specialists in IT (often with an equipment
involvement), and specialist consultants. Most major
management consultants also operate in the industry,
accounting for around 9% of the IT consultancy market,
while IT represents around 18.5% of their turnover.

Growth in the IT consultancy sector has been very strong

since 2014, reflecting growing demand and low barriers
to market entry for micro companies.(See Figure 8)

SOURCE: CLOUD INDUSTRY FORUM

FIGURE 8: ANALYSIS OF THE CHANGES IN THE STRUCTURE OF THE IT

CONSULTANCY INDUSTRY, 2012-16

Note: percentages may not add up due to rounding

SOURCE: MBD ANALYSIS OF GOVERNMENT DATA

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 WHAT WE THINK
The IT sector is demonstrating constant evolution, and the rapidity
and scale of these developments has increased complexity in the
service sector that surrounds its implementation. This will result in relentless
growth in the market, with dynamic growth prospects expected beyond the
review period.

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