Profits sink for almost half of world’s top IT service providers

Profits sink for almost half of world’s top IT service providers

Data finds HPE, NCR and Atos bottom lines were hit the worst in 2020.

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Almost half of the world’s top IT service providers saw revenue and profits fall in 2020, according to new data from GlobalData. 

The analyst firm's figures revealed that 50 per cent of the top 20 IT service providers by revenue reported a year-on-year revenue decline in 2020, while nine saw a drop in net earnings. This fall come despite the global move to remote working and the ensuing reliance on IT services, alongside the global digital transformation push. 

“Conditions could remain challenging for IT service providers as cost-optimisation strategies necessitated by the COVID-19 pandemic will likely become long term,” said Keshav Kumar Jha, business fundamentals analyst at GlobalData. 

“However, IT infrastructure and application outsourcing service providers may benefit considerably from the digital transformation adopted by organisations amid the health crisis.” 

The hardest hit were Hewlett Packard Enterprise (HPE) and point-of-sale vendor NCR, with the former seeing net profits sink by 130 per cent and the latter’s falling by 114 per cent. The two respectively also saw revenue declines of 7 per cent and 10 per cent. 

DXC Technology’s revenue declined the most of the top 20, falling by 9.4 per cent year-on-year. According to GlobalData, this occurred mainly due to the termination of projects, the disposition of business and completion of projects, besides a decrease in the number of run-rate projects volume. 

Meanwhile, other global giants such as Fujitsu, the second-largest IT service provider behind Accenture, saw revenues fall. Others include India’s Tata Consultancy Services, France’s Atos, Canada’s CDI and India’s Wipro and Tech Mahindra. 

Although South Korea’s Samsung SDS saw a marginal revenue increase of 1.5 per cent, its net profit plummeted by 40 per cent. 

However, on a brighter note, GlobalData reported that Fiserv, NetEase, Capgemini and Intuit all gained double-digit growth in revenue. For Capgemini, growth in digital and cloud service due to the prioritisation of digital transformation projects by clients worldwide helped increase its year-on-year revenue. 

Gary Barton, principal analyst for business network and IT Services at GlobalData, said IT providers experienced customers delaying IT transformation projects as “enterprises struggle to understand what their businesses will look like in terms of new working practices after the pandemic”. 

However, there are potential opportunities in new technologies such as 5G, internet of thing and edge networking/compute to generate new IT revenue growth, he added.  

“The use cases for these technologies are still being developed, but there are clear rewards for IT companies that can demonstrate clear business/consumer benefits of these technologies. Finally, there are signs that smaller businesses are becoming more attuned to the benefits of being more digital.” 

Tags CapgeminiTata Consulting ServicesAtosHPEDXCWiporIT service provier

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