The IT services market in France
1 - The IT services market today
Who are they ?
Digital Service Companies or IT services companies, are companies specialising in the new information and communication technologies sector. They put the digital skills of their employees at the service of companies in the digital transition phase that do not have the internal resources to go digital. IT companies are a major player in the management of change in companies.
They differ from software publishers who simply offer to create software solutions adapted to their clients' needs. The activity of IT consulting firms is similar to that of consultants in New Information and Communication Technologies.
The growth of IT consulting firms
IT consulting firms have been growing rapidly since the early 2000s. The last few years in particular. Their growth rate was 3.1% in 2019, according to a study conducted jointly by Syntec Numérique and KPMG. The sector's turnover reached €57.8 billion in 2019. This constant growth is reflected in the number of employees in the sector, which is close to 200,000.
Today, after the crisis, the size of the digital market has been re-evaluated at 56.3 billion euros. 53% of the market for IT consulting, which corresponds to 30.1 billion euros. In 2021, the estimated growth for these companies was +4.4%.
These digital services consulting companies are taking advantage of businesses’ growing need for digitalization. Thus, 56% of French companies see digital transformation as an “opportunity”. An opportunity to lower costs, reduce the time spent on data entry or on sharing information within the company.
In addition, there are profound changes in management processes, linked to the growth of digital technology. All these factors create a favourable context for the development of IT consulting companies, whose main clients are SMACS (Social, Mobile, Analytics, Cloud, Security), followed by banking, insurance and professional services.
2- The war for talent: a challenge for IT services
Employee skills
The added value of an IT services company lies in the technical skills of its employees. But also the computer programmers and engineers who are the only ones capable of putting in place the digital tools that meet their clients' needs.
The scarcity of profiles and the war for talent is one of the main challenges facing IT consulting firms. According to Syntec Numérique, "the obstacles to the development of IT services companies are not on the demand side, but rather on the supply side of skills". Consequently, recruiting and retaining talent is a key factor in the development of IT services companies. In this context, the rise of freelancers is an opportunity, as it offers more flexibility.
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High employability
This just-in-time job market gives computer programmers a very high level of employability today: 86% of IT services companies offer a permanent contract as a priority, rather than a fixed-term contract or freelance status. This reflects a need to secure their employees. 75% of IT service companies say they have had difficulty finding suitable candidates for the latest positions they have offered.
Today, more than ever, everyone is looking for data scientists, computer scientists and cyber security experts. The digitisation of business processes and customer journeys or the creation of new services, for example, create a lot of IT needs. Many companies want to call on external resources. IT services can take advantage of this high demand for talent by re-evaluating the prices of their services.
What impact?
This race for talent has a direct impact on the development strategies of digital transformation consulting firms. They are redoubling their efforts to win the battle for talent. External growth strategies are the first to be influenced, as a consequence of this need. According to Syntec Numérique, 51% of the takeover of a competing IT consulting company is motivated by the acquisition of its developers (this figure rises to 60% for SMEs), and only 31% by the acquisition of its client base.
In addition, digital service companies are constrained by the weakness of their margins, which are on average 15%, compared to 24% for the entire non-financial tertiary sector. Their activity being directly linked to the number of talents placed with their clients, the volume of projects, and therefore the recruitment of new talents is the main way to increase their turnover and their profit.
However, the question of optimizing the management of IT service companies is increasingly coming up as a way to increase margins. Indeed, faced with the difficulties encountered in recruiting new employees, questions such as those of optimizing the workload of existing programmers and reducing the time spent on non-billable tasks thanks to the automation of recurring tasks becomes a real subject. Control solutions responding to this need for optimization are beginning to emerge.
Another obstacle for IT services?
Finally, data protection is another obstacle to the development of IT consulting companies. Clients are increasingly sensitive to this issue, and may be wary of a complete digital transition, for fear of seeing their data corrupted or hacked. This caution, which is also justified, implies increasing customer demands in terms of data security, which is pushing French IT services companies to optimise the management of their activity.
3- The challenge of the internationalisation of French IT services companies
A subject that is still not widely discussed today is the degree of internationalisation of French IT services companies, which remains very low compared to their European competitors. According to the overview drawn up jointly by Syntec Numérique and KPMG, French IT services companies generate an average of 18% of their turnover abroad, and this share falls below 10% when we talk about SMEs and ETIs.
While this can be explained by the steady growth of the French market, it is still lower than the global average growth of the sector. The added value that internationalisation represents for IT services companies does not seem to be fully taken into account by the former IT services companies, since the Syntec Numérique and KPMG study shows that the majority of French IT services companies consider France to be the most promising market.
What exactly are the advantages of internationalization?
For IT services companies, exporting abroad is first and foremost a response to the major problem facing them: talent recruitment. Indeed, the fact of setting up in a new market allows Digital Services Companies to integrate into a new pool of talent, and thus increase their chances of finding the rare pearl.
This first advantage leads to another: since the performance of IT services companies is, to a certain extent, proportional to their size, increasing the number of employees by setting up abroad, and thus benefiting from a larger pool of talent, makes it possible to reach critical size more quickly.
Finally, if the French digital transformation market is indeed buoyant, foreign markets are at least as buoyant. Indeed, the sales of German IT consulting companies, for example, represent twice those of their French counterparts. So why not take advantage of the market in this neighbouring country, while enjoying the benefits of internationalisation mentioned above?
Some seem to have understood this, since despite its weakness, the degree of internationalisation of French IT services has increased significantly since 2017. It is motivated at 68% by the support of a current client in its strategy of setting up abroad.
The problem posed by internationalisation is similar to the one currently posed by the increase in the number of remote employees: how can the projects of an IT consulting company be managed efficiently from a distance? Indeed, it is already more and more time-consuming to have a good visibility on resource planning and the projects in progress of one's collaborators when they are in France, working from home, so internationalisation can wait until tomorrow... right?
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