IT services and software will be the highest-performing segments in 2023, report says

One of the silver linings of the pandemic, for Cyprus at least, was that it accelerated the island’s digital transformation. This is all the more apparent in a recent report into the performance of the Cypriot ICT market, which despite the pandemic and then war in Ukraine, grew significantly in 2022.

And the momentum is set to continue, with the outlook for the near future at a high what with the majority of ICT companies operating in Cyprus planning to launch new services.

According to the report, prepared by the International Data Corporation (IDC) and Cyprus Computer Society (CCS): “The economic recovery and the digital transformation spurred by the pandemic drove the expansion of the ICT sector in 2022. The sector contributes significantly to the diversification of the country’s growth model, as well as to the reduction of its trade deficit. The outlook for the near future is also positive, as the majority of ICT companies operating in Cyprus plan to launch new services.”

The report focuses on all ICT market segments — including the IT equipment, IT services, software, and telecommunications markets — and covers 2023 market sizing, forecasts until 2025, and trend analysis.

The in-depth analysis for 2023 covers the IT services segment. It is based, inter alia, on a representative end-user survey of Cypriot companies and a survey of ICT companies operating in the country.

According to the report, the Cypriot ICT market (including telecommunications) reached a value of €781m in 2022, growing 4.7% year-on-year. The IT market (excluding telecommunications) was valued at €302m, representing year-on-year growth of 8.4%. Spending on IT services reached €156m, (up 10.1% y-o-y).

IDC expects ICT spending in Cyprus to increase an annual 3.5% in 2023 to total €808m. IT spending is expected to increase 7.4% y-o-y to reach €324m.

“The Cypriot economy is expected to thrive and digital transformation to accelerate as a result of the global pandemic,” the report said. “IDC predicts spending across all ICT market segments in Cyprus will grow. IT services and software will be the highest-performing segments over the forecast period, posting a compound annual growth rate (CAGR) of 6.7% and 5.5%, respectively, due to increased demand for digitally enhanced solutions and services.”

All these positive trends are reinforced by the Cypriot government, the report highlights.

“An important step in its supportive activities was the establishment of the Deputy Ministry of Research, Innovation, and Digital Policy (DMRID), which has since played an essential role in the preparation of national ICT strategies and the promotion of emerging technologies,” it said. “Remarkable achievements have been made in areas such as AI and blockchain (Cyprus is currently among the top 3 blockchain hotspots in the EU in terms of regulatory maturity and investment capital raised by start-ups).”

The government of Cyprus also encourages investment in 5G infrastructure and broadband connectivity, it said, with special incentives to serve underdeveloped areas.

Meanwhile, in terms of the best performing sectors, project services have become the largest IT services primary market, overtaking support and training services, while outsourcing services remains in third position. The finance sector is the largest spender on IT services, followed by the public sector and telecommunications, as long-term tender-based projects are common, with extended revenue streams for contract winners.”

Finally, the report said around half of Cypriot companies expect to increase their IT services spending, while more than 21% will maintain their current level of investment.

To read the full report, click here