IT market development
- Customers increasingly combine private and public cloud to enable business innovation and agility in a cost-efficient way.
- Solutions supporting automated end-to-end application lifecycle management are gaining ground. These solutions enable faster-paced innovation and reduced cost and time for the process to launch new products and services.
- New technologies will enable a new data-centric ecosystem where customers are provided with personalized experiences – in many cases, by new service providers utilizing automated service deliveries.
It is estimated that in 2016 the market Tieto operates in grew by around 2%. In 2017, the market is anticipated to grow by 2–3%. Emerging services are expected to experience double-digit growth and the decline in traditional services will continue. Sweden is expected to be the fastest-growing market. In Finland, the outlook has somewhat improved while the slow growth of the economy will continue to affect the IT services market.
Digitalization of customers' business – with a twofold agenda of growing revenue through innovation and reducing costs by improved efficiency – continues to drive IT market growth. The majority of organizations are still in the early stages of their digital journey. Many clients already provide digitally enabled customer experiences but integration of services is at a low level. With greater maturity, companies can provide innovative services and even remake the existing markets and create new ones. Customer experience has become one of the most important investment areas while at the same time enterprises put more focus on rebuilding their back-end business processes.
To enhance business value, IT partners need to have strong industry and business insight, technology understanding and the ability to orchestrate new digital services for clients. In line with the changing requirements, SIAM (Service Integration and Management) adoption is accelerating. The SIAM market is moving from customer-managed integrations to a model where the extensive responsibility for integrations is shared by the customer and IT partners.
The cloud becomes the vital underpinning for digital transformation and customers are increasingly combining private and public cloud solutions to enable business innovation and agility in a cost-efficient way. It is estimated that currently around 20–25% of infrastructure services are represented by cloud, predominantly private, with public cloud as an option. Annual growth in the cloud services market is estimated to be around 30%.
Technologies such as the cloud, software robotics, artificial intelligence and blockchain will enable a new data-centric ecosystem where individuals are provided with personalized, predictive experiences. The role of current service providers in multiple industries may radically change and services provided by them may be replaced by automated computer execution, ruled by a business network driven by new vendors. New opportunities arise not only within industries but also in new ecosystems in the intersection of multiple industries, and consequently traditional industry boundaries will be blurred.
Co-creation with partners and customers is becoming more important in order to provide customers with best-of-breed technologies. This trend is accelerated by increasing openness, as open APIs (application programming interface) and open data make collaborative innovation possible.
In IT spending, emerging services are gaining ground while traditional services, such as infrastructure services, are seen as a source of cost reductions. Going forward, IT service providers will continue their investments in service delivery standardization, automation and productivity improvements.
Industry sector drivers
- In the financial services sector, the market continues to be active with many large transformation programmes ongoing and planned. After a period of longer decision cycles, demand is picking up in both the Nordic countries and global banking markets. The market is mainly driven by a combination of digital transformation, core system modernization and regulatory changes. There is growing interest in business process outsourcing and software as a service delivered on secure cloud platforms. The market in the Finnish pension segment is active due to the pension legislation reform in 2017.
- In the public sector, the digitalization of services and processes will continue with a focus on cost reductions and citizen-centric services. There is also healthy demand for solutions such as digitalized learning and planning for the education segment. In Finland, Tieto is actively participating in the Government development programme in order to facilitate digitalization in the public sector. In Sweden, the outsourcing trend continues to be strong and there is robust demand for Tieto’s cloud services. Demand for consultancy services has also remained strong in Sweden.
- In the healthcare and welfare sector, the digitalization trend will continue to support easier and faster access to healthcare for citizens and compensate for the anticipated shortage of care workers. In Sweden and Norway, plans to further develop electronic health records are in progress. In Finland, it is anticipated that the ongoing healthcare and welfare reform will provide growth opportunities while in the short term, only necessary investments are being started.
- In the manufacturing, forest and paper sector, there is a strong digitalization trend and clients are seeking new business and service models to ensure steady revenues, often based on Industry 4.0/Internet of Things. The market for consulting and business transformation is active. Preventive maintenance is driving digitalization in the manufacturing sector and customer experience can be seen as a strong driver, especially in the forest sector.
At the same time, only projects with high business value are initiated and clients seek cost savings and automation in traditional IT services. The core process renewals for improved efficiency are moving towards cloud-enabled ERP solutions.
- In the retail and logistics sector, enterprises are investing in more advanced solutions to be able to provide a unified customer experience in all interaction across different touchpoints. In addition to consultancy and implementation capabilities to renew eCommerce channels, demand for improving tools for service personnel has remained good. Along with the omnichannel transformation, enterprises need to tightly integrate their customer interface solutions with their core supply chain solutions. In addition, B2B enterprises are expanding from transactional digital services to enhanced user experience.
- In the energy utility sector, differentiation is increasingly based on improved customer interaction. Furthermore, a strong focus on efficiency due to low energy prices continues. As a result, there is interest in investing in customer experience management and modern software-based systems. In the oil & gas market, investment levels have remained low and the focus in the entire industry is still on lower cost. However, due to a global shift towards lower consumption of carbon fuels, the natural gas segment is gradually picking up.
- The media sector is undergoing a huge change with increased deployment of digital services. Advertising is one of the main sources for revenue and related solutions call for renewal. While there are opportunities related to renewal and automation of sales processes, price pressure is high as many companies need to reduce costs.
- In the telecom sector, IT transformation programmes are driven by the need to simplify legacy systems and cut costs as well as by the potential to create additional business value. Telecom operators are moving from customized solutions to sourcing of standardized packaged solutions. IT service providers are experiencing aggressive competition in this sector.