Information technology (IT) has come a long way since the early days of popular computing in the mid-20th century. Starting initially with huge calculators taking up giant rooms, with 4050 valves and power consumption of 25 kilowatts, computers in 2022 can fit inside your pocket (and hold tremendously more power). The pace of innovation also continues to accelerate. Every two years, computing power essentially doubles (following “Moore’s Law”). Given the scope for technological progress, what kinds of opportunities may lie in wait for investors? In this industry report, our investment team at Bure Valley Group surveys the global IT landscape in 2022. Below, you’ll find our latest market overview, key players, opportunities, trends and risks to factor into your portfolio planning.
Global IT in 2022: market overview
In 2022, global spending on IT services is expected to reach $4.45tn; a 5.1% increase from the previous year. In 2020, the US comprised the biggest share at 32% ($1.7tn); a position which it has maintained for some time. Asia follows in second place at 31%, and Europe third with 22%. Globally, the IT industry is expected to have a compound annual growth rate (CAGR) of 5%, which has been its standard pace for several years (although 2020 presented a “speed bump” with the COVID-19 pandemic interrupted business sales).
The IT industry can be broken down into several segments. Region is one of these, already mentioned. Yet it may also be divided by sectors served (e.g. healthcare, financial services and manufacturing), company size (market capitalisation) and service type (e.g. software, telecoms and computer hardware). Devices and “emerging tech” can also be important scopes through which to run an analysis.
Key players in Global IT
The world’s largest IT companies emanate, of course, from the US. These include the likes of IBM ($125bn), Oracle ($191bn) and Microsoft ($2.04tn). Notable others are Hewlett Packard ($42.49bn), SAP ($114.45bn), Accenture ($198bn) and Infosys ($82bn). Many of these feature in the US’s Dow Jones Industrial Average (DJIA) – regarded as a bellwether of overall economic performance in the US – and its tech-heavy NASDAQ, its second-largest public exchange.
Recent trends & COVID-19 impact
As in almost all verticals, the COVID-19 pandemic had a major impact on the global IT industry. Most notably, it placed a huge break on the supply of raw materials essential for computer hardware. Semiconductors – largely sourced from Taiwan – were in short supply, exacerbated by the rise in global demand due to increased remote home working. Quarantine and social distancing measures hit specific sections of the IT industry – e.g. smartphones – especially hard due to their labour-intensive supply chain.
Despite these challenges, however, the global IT market has continued to expand. With more customers and businesses now more used to online communication, demand for IT-based solutions (e.g. teleconferencing) has remained high. Certain customer segments (e.g. over-60s) who were reluctant to use the likes of Zoom, Google Hangouts and Skype are now more accustomed to video-based software – using it even to stay in touch with family. These software (or cloud) base solutions all need a strong IT industry to base themselves upon, and provide a positive overall outlook for investors in the near future.
COVID-19 has, arguably, opened up opportunities for the global IT sector. Demand for 5th generation (5G) internet technology is growing to facilitate widespread demand for strong, high quality video connections (e.g. for video conferencing). Telehealth is also rising in popularity across customer segments, with governments recognising the savings that can be made from not having so many patients on-site at the hospital. This has led to the creation of many health and mind-wellness apps, allowing more people to get diagnosed and treated without even needing in-person help from a doctor.
Future opportunities & risks
When the COVID-19 pandemic started two years ago, it launched many organisations into a new era of digital transformation. Increasingly, businesses, charities and government agencies are embracing cloud-based solutions to make their operations faster, more secure and more future-proofed (e.g. should another pandemic arrive). This lays a strong foundation for future growth in the IT industry.
Of course, it is not a completely rosy picture ahead. In 2022, we have witnessed a rise in inflation across the western world. In the UK, it currently stands at 9% – the highest since the 1980s. This is leading to higher input costs for businesses, including those in IT, which means lower profits on sales. It can also lead to a rise in interest rates which, in turn, typically results in less consumer spending in the economy (e.g. on IT products). As mentioned earlier, many IT companies follow the economic outlook as a whole. With a possible recession on the horizon, things could be difficult for large IT stocks in the months/years ahead.
With this said, many opportunities can be found amongst smaller, early-stage companies in the technology sector. Savvy angel investors can still make strong returns here, even amidst harsher conditions. Here at Bure Valley Group, we offer a range of pre-vetted startup projects – including in the IT/cloud space – which may be of interest to you.
If you are interested in expanding your portfolio into these kinds of exciting spheres of investing, then we invite you to get in touch with us here at Bure Valley and to consider joining our exclusive investor network:
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