The European market for medium-sized companies, that is, those with annual revenues of between €500 and €5,000 million, constitutes a business opportunity for the IT service provider industrysince the budget they will allocate to this item will grow more than that of the market as a whole, as they seek external support to execute your digital transformation plans, According to a new report from the consulting firm, Oliver Wyman.
The firm’s experts estimate that the investment that companies in this segment will carry out will increase by 8.8% in annual rate between 2021 and 2026 (above the annual rate of increase of 7.6% for the entire market), which implies that the aggregate expenditure for IT services in the European mid-market it will increase by 52% over the next five years (compared to 44% for the market as a whole), to €99.6 billion.
“In the aftermath of the pandemic, many businesses have decided to catch up on key investments to accelerate their transformation to the cloud, address growing cybersecurity requirements, and ultimately modernize their applications. Until now, around 50% of customers in the mid-size segment had chosen to operate most of their IT primarily by themselves, for concerns about the protection of sensitive data and the cost advantage. However, many of them now face difficulties managing the full breadth of the transformation journey with internal resources. Consequently, they are increasingly turning to third-party providers for help, especially midsize clients, who are more challenged to attract talent in an environment of general shortage of IT resource experts,” explains Hendrik Willenbruch of Oliver Wyman.
More than €65,000 million invested in IT, in 2021
In 2021, the European mid-market allocated more than €65.4 billion to IT services, a figure that represents 28% of the almost €230 billion invested in this item by all companies in Europe (excluding the public sector).
By sub-segments, the smallest companies (€500 – €1bn) invested almost €19.5bn (30% of the total), firms with between €1bn and €2bn annual revenues spent €17bn on IT in aggregate (in 25% tone) and the expenditure of the largest, the sub-segment between €2,000 and €5,000 million, was close to €29,000 million.
By sectors, telecommunications and technology companies were the ones that invested the most in IT (27%, with more than €17.5 billion), followed by the banking and insurance industry (21%, €14 billion) and the manufacturing and natural resources industry (€9.9 billion or 15% of the total). total).
Of the three European markets analyzed by Oliver Wyman, Germany is the second that invests the most in IT services, behind the United Kingdom, whose companies allocated more than €18.5 billion to this item in 2021.
Mid-market preferences regarding IT service providers
According to the study, medium-sized companies are traditionally served by large traditional systems integrators or by local medium-sized players and system houseswhich have become a strong foothold for smaller companies thanks to the physical proximity and cost competitiveness they offer.
The panorama changes for the segment of large corporations or multinationals, which tends to favor the large global providers of IT services.
As to behavior when making purchase decisions, medium-sized companies prioritize those providers that offer tailored and specific solutions for their industry, as well as quality service. These two factors are even more relevant than price, which only appears in third position in the results of a survey carried out by Oliver Wyman for this study.
This pattern is consistent across all mid-market sub-segments, although smaller companies, generating between €500 million and €1 billion in annual revenue, appear to be more price sensitive, especially when choosing large global IT service providers.
Finally, Oliver Wyman’s study concludes that mid-market companies show a higher level of adherence to their IT service providers. In fact, the bottom tier of the mid-tier segment (with annual revenues between €500 million and €1 billion) tend to be very loyal to their IT service providers: only 4% of them have switched to their top two providers in the past few years. last two years. Meanwhile, larger companies (€2bn to €5bn in annual revenue) are more likely to switch suppliers: 20% say they have changed one of their two main suppliers in the last two years.
