The Information Technology (IT) sector has become increasingly diverse over the last few years thanks to innovation in software and hardware applications. As a result, there is more room in the sector for operators in secondary industries such as IT consulting and data processing. This allows the overall economy to realize greater efficiency from both the front end and back end of the IT sector. Cloud computing and software-as-a-service (SaaS) models are anticipated to continue generating opportunities for more efficient use of the end-user services that the sector offers. These dynamics enable it to remain highly profitable despite several structural challenges, including piracy, litigation, high research and development costs, and an expensive workforce.
Value of Closed Domestic M&A Transactions ($mm)
Sector Performance vs. National GDP
Access to the internet and to devices using the internet is expected to continue growing for the foreseeable future. This will help propel the IT sector and its secondary industries, simultaneously increasing and diversifying its revenues. Data storage, analysis, and security will become increasingly important to the industry as cloud computing and SaaS become more prevalent. This dynamic will in turn push IT-related operations to third-party operators within the sector itself. The greater volume and complexity of data, along with the need to integrate with a growing array of software platforms, all point to sector consolidation in the next few years, especially for large sector operators. Still, independent non-employer entrants are expected to outpace this trend, leading the number of operators to likely grow in the foreseeable future.