IT market development
The total market is expected to remain dynamic and to see further growth. In 2018, the Nordic market is anticipated to grow by 2%.
Digitalization of customers’ business is accelerating in support of a twofold agenda of growing revenue through innovation and reducing costs by improving efficiency. Customers focus on enhancing digital capabilities, such as analytics, to expand their existing product and service portfolios and improve user experience. A new generation of digital platforms is being built – and at the same time, existing legacy systems are being modernized.
Emerging services based on new technologies such as the cloud, software robotics, artificial intelligence and blockchain are expected to experience double-digit growth and the decline in traditional services (traditional application and infrastructure services) will continue. Artificial intelligence and machine learning, for example, help detect patterns in vast volumes of data, and hence provide improved insight into potential outcomes. Consequently, enterprises will be able to provide customers with personalized, predictive experiences and increase the automation and accuracy of processes.
Blockchain and distributed ledger technologies enable businesses, public organizations and individuals to form trust relationships and transact over the Internet more efficiently, without involving middlemen. Tieto established a new Blockchain Solutions business unit in 2017. The purpose is to help organizations in various industries to renew their business by providing technology consulting and a variety of services through an extensive ecosystem of partners. One of the first steps is to introduce a global identity network for Nordic customers together with Evernym – a leading developer of self-sovereign identity technologies.
It is estimated that currently around 20–25% of global infrastructure services are represented by cloud, predominantly private cloud. While most organizations use cloud services to some extent, fewer than 20% are currently cloud mature. The total infrastructure cloud (Infrastructure as a Service and Platform as a Service) market is expected togrow by 15–20% annually. This comprises
- public cloud adoption – expected market growth 25–30%
- private/enterprise cloud – expected growth 10–15%.
Future cloud market growth will extensively be driven by multi-cloud solutions integrating public cloud, private cloud and traditional technologies for customers to enable cost-efficient business innovation and agility. Tieto’s focus and growth since 2014 have mainly been based on its private cloud offerings. In 2017, Tieto expanded its cloud portfolio to include public cloud services through the launch of OneCloud. OneCloud is a multi-cloud solution seamlessly orchestrating workloads across private and public clouds.
There is an accelerated need for customers to quickly roll out new digital services. The trend involves moving to automated application development and maintenance, as well as adoption of multicloud strategies, requiring strong service orchestration capabilities. In line with these trends, traditional development programmes are cut into smaller projects. The IT industry is also continuing to shift from traditional large outsourcing agreements towards agile methods and consumption-based business models.
Customers’ competitive landscape is changing fast with new technology-based companies entering the market, in some cases from outside clients’ own industry. This trend, visible across all industries, is calling for an active innovation agenda for current actors to remain competitive. Currently, this has the greatest impact on the financial services and retail sectors.
The new EU General Data Protection Regulation, taking effect in May 2018, has an impact on IT markets. This regulation will open up new opportunities for Tieto’s security and application services.
Sweden continues to be the fastest-growing of Tieto’s core markets, which is also reflected in activerecruitment of IT talent in all industries. In Finland, the economic outlook has improved, and this will gradually also support the IT services market.
Industry sector drivers
- In the financial services sector, there is still a rather high level of activity with several large programmes ongoing, driven by digital transformation, core system renewal and regulation. However, many programmes are divided into smaller projects to better control performance and costs. The market is currently capability driven, as many of the larger programmes are managed by customers and require a broad range of competences across markets. Many new smaller players (Fintech) are still entering the market, continuing to challenge traditional IT service providers. Regulatory changes such as PSD2 (Payment Services Directive) and GDPR (General Data Protection Regulation) are creating new opportunities within Financial Services, but also pose a degree of uncertainty and postpone larger customer transformation projects. Interest in business process outsourcing and software as a service delivered on secure cloud platforms continues to grow.
- In the public sector, the digitalization of services and processes will continue with a focus on cost reductions and citizen-centric services. There is healthy demand for consulting services and solutions such as digitalized learning and planning for the education segment and mobile solutions for elderly care. Due to recent security incidents, mainly in Sweden, there is some cautiousness related to outsourcing of IT services, and clients seek to ensure that data is stored and services operated within their jurisdiction. In Finland, Tieto is actively participating in the Government development programme in order to facilitate digitalization in the public sector.
- 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. There are large development projects planned across all Nordic markets and the prevailing trend is to move towards integrated healthcare and welfare systems supporting seamless care. Large-scale Electronic Medical Record procurements are ongoing in all Nordic countries. In Finland, it is anticipated that the ongoing healthcare and social welfare reform will provide growth opportunities in the coming years. The first regional proposals were submitted during 2017; due to delays in legislation, customers will focus on smaller modernization activities.
- In the manufacturing, forest and paper sector, the strong digitalization trend continues and clients are seeking ways to deploy IoT in production as well as new smart services and products to ensure steady revenues and to improve service experience. At the same time, core process renewals to deploy cloud-enabled ERP solutions are ongoing. Preventive maintenance continues to drive digitalization in the manufacturing sector and customer experience is a strong driver. In the case of wood and production equipment, there is increased interest in digital twins of assets, using data from sensors installed to represent their current status. In the paper industry, the need to lower production costs continues to drive the adoption of new digital solutions, such as IoT and Smart Manufacturing. The market for consulting and business transformation is active.
- In the retail and logistics sector, enterprises are investing in more advanced solutions and eCommerce platforms to be able to provide a unified customer experience in all interaction across different touchpoints, including brick and mortar. Along with the omnichannel transformation, enterprises need to tightly integrate their customer interface solutions with their core supply chain solutions and seamless mobile payments. In addition, B2B enterprises are expanding from transactional digital services to enhanced user experience.
- In the energy utility sector, automation and digitalization is needed to improve efficiency and customer care, and differentiation is increasingly based on improved customer interaction. In the Nordic countries, common electricity hubs and the implementation of a supplier centric model will continue to drive the market for customer information and billing solutions in 2018. In Finland and Sweden, the next generation of smart meters will open new opportunities for Advanced Meter Infrastructure services. In the oil & gas market, there is healthy demand for Tieto’s solution.
- The media sector is continuing to undergo a change with increased deployment of digital services. Advertising continues to shift from traditional media to digital channels and related solutions are being renewed. 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, demand for IT services is driven by modernization of existing legacy systems as well as transformation towards new platforms that create additional business value. Customers are increasingly utilizing agile development methodologies to quickly launch and manage new services. The regulatory requirements in the EU are creating a positive business environment for service providers.