2019 review and 2020 outlook for the digital sector: The new government must focus on investment and training

A sector affected but resilient in the face of solid demand

The Covid19 crisis has slowed the sector’s dynamism:in 2019, the sector posted growth of 4.2%. After the crisis, it forecasts a 6.7% drop in sales for the sector as a whole in 2020. The slowdown concerns the three main activities represented by Syntec Numérique: software publishers, digital services companies, and technology consulting (outsourced R&D), which is the hardest hit due to the simultaneous impacts on the aerospace and automotive industries.

And yet, the digital sector is showing signs of recovery, albeit slight: 86% of companies are seeing a resumption of projects in progress and an upturn in sales.

SMACS (Social-Mobility-Analytics-Cloud) are driving the market, with net growth estimated at 450 million euros in 2020, or 3.2% vs. 2019. The cloud is a key growth driver: for the companies surveyed, demand for public cloud services is set to rise by 8% as a result of the crisis. On the digital market, 24% of companies plan to invest in the cloud to better exploit their data, and another 24% will migrate their applications for reasons of availability.

Software publishing: Saas remains dynamic

+6.6% growth in 2019, -3.6% in 2020: this is the sector showing the fastest signs of recovery. Although affected by the Covid19 crisis, software publishers are nonetheless competitive: more than 8 out of 10 companies expect their business to recover in the second half of this year, and 40% of publishers are forecasting sales growth in 2020.

The SaaS model (hosting and updating operating software on remote servers) remains particularly dynamic: 86% of companies forecast either stability or growth in the market in 2020.

Digital Services Companies: the cloud as a recovery booster

According to Syntec Numérique members, it is the development of new, high value-added service offerings (development of cloud offerings, new cybersecurity offerings, development of offerings around artificial intelligence and machine learning…) that will be the main lever for the sector’s recovery in 2020. The development of Cloud offerings is intensifying, and will reach 23% of the sector’s market share in 2020, representing growth of 9.1% (vs. 19.4% in 2019).

The ESN sector is the second least affected by the Covid19 crisis, with +3.1% growth in 2019 and -6.2% forecast for 2020.

Technology Consulting: safeguarding and transforming industry through training

79% of Technology Consulting companies experienced growth in 2019, but only 12% are forecasting an increase in sales in 2020. The reason: the decline in the order book, which deteriorated in 83% of cases in the 1st half of 2020.

Technology Consulting groups together companies in the outsourced R&D sector (130,000 employees, most of them highly qualified). These companies operate across the entire value chain of a product’s life cycle, and in all industrial sectors. Depending on the depth of Covid19’s impact on these sectors, the recovery will be slower or slower: from 0 to 6 months for pharmaceuticals, energy and telecoms, from 6 to 12 months for the automotive industry, and more than 12 months for aeronautics.

To prevent talent fleeing abroad and keep skills in France during this period, the focus must be on training! Syntec Numérique is therefore proposing that the government implement a new scheme, the FMDCI – Formation pour le Maintien et le Développement des Compétences d’Innovation – which will enhance the skills of the 50,000 engineers and senior technicians in outsourced R&D as part of the implementation of new innovation projects.

We estimate that the average gap between estimated pre-crisis and estimated post-crisis 2020 growth will be -11.6% for the least exposed players, and -23.4% for the most exposed players (aerospace, automotive, etc.).

Digital is not a sector like any other: it can be the linchpin of the recovery.