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Recent Price Trend - IT Consulting Services
In the three years to 2017, IT consulting prices have been growing marginally at an estimated annualized rate of 0.9%. Price growth can be attributed to increases in demand and suppliers’ operating costs. However, rapid supplier entry into the market has kept the IT consulting market fragmented and competitive, which has kept recent price growth in check. Buyers have also benefited from low price volatility, which enables buyers to better budget for their expenses and effectively time their purchases.
In the past three years, businesses have increasingly incorporated new computer technologies, including online services, into their business processes. The percentage of services conducted online has been rising, requiring implementation of new technologies to securely provide online services to customers. Meanwhile, corporate profit has fallen slightly in the three years to 2017 but remains notably higher than prerecession levels, allowing companies to continue investing in developing their IT infrastructure, which has led to a rise in private investment in computers and computer software. As companies have become more reliant on computers and invested more money into computer equipment, buyers have had greater need for IT consultants to help develop their IT infrastructures and troubleshoot issues. These trends have boosted demand for IT consultants and, in turn, elevated the pricing power of IT consulting suppliers.
Growing operational costs have also encouraged price inflation. Suppliers’ professional service, marketing, rent and utilities, and other overhead costs have grown in the three years to 2017. In response to growing operating costs, suppliers have raised prices to protect their profit margins.
Fortunately for buyers, an influx of new operators in the market has increased the number of suppliers available to choose from. Although a high level of technical knowledge is crucial, new suppliers face low barriers to entry. As such, new suppliers have been able to enter the market nearly in line with rising demand. This trend has kept supply deficits to a minimum and the market highly competitive. As a result, price growth has been tempered.
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