After five years of double-digit growth in the IT service sector, with spending regularly hitting more than $1 trillion (£757.3bn) a year, new data forecasts that the market faces an imminent slowdown that will cut the annual spending growth rate in half.

Following a close analysis of the IT services sector, including IT and business process outsourcing as well as IT consulting and implementation, Stocklytics, the stock analysis platform, believes that the industry’s annual growth rate is set to plummet, falling to reach 4.5% by 2029.

According to Stocklytics, global spending on IT services has already lost significant momentum this year, weakened by economic uncertainty, rising borrowing costs, tighter budgets, and ongoing trade tensions, which have seen firms hold back on bigger tech investments and projects.

Figures from Statista show that IT service spending skyrocketed back in 2023, with a 15% jump in a single year to $1.29 trillion (£997.2bn), with spending rising again last year to more than $1.4 trillion (£1tn) and will improve again in 2025 to hit more than $1.5 trillion (£1.13tn) in total spending.

However, despite what looks like a stratospheric rise, last year saw growth slow to 9.4%, while this year will see an even smaller growth rate of 6.4%.

Following that trend means that, when looking ahead to the end of the decade, although global IT services spending is expected to hit $1.87 trillion (£1.41tn), the growth rate by 2029 is forecast to be as low as 4.9%.

The global slowdown in overall IT services doesn’t mean companies aren’t spending heavily elsewhere.

Stocklytics said that while firms might be more cautious of outward investments and riskier ventures, they are planning to spend more on IT solutions for their workers, with average spending per employee jumping up 26% from $420 (£318) in 2025 to $505 (£382) by 2029.

That could be reflective of a growing desire to prioritise efficiency over scale, with budgets instead being directed to improving workplace productivity. 

Stats from the recently published Stanford AI Index 2025 provide some evidence of that trend, with global private investment in AI surging to $252.3 billion in 2024, an increase of 44.5% from 2023, while 71% of businesses have adopted genAI tools, more than double the 2023 figure.

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Meanwhile, recent figures from Gartner forecast that genAI spending is expected to total $644 billion (£500bn) this year, largely driven by the integration of AI capabilities into hardware, such as services, smartphones, and PCs.

Added to that, Amazon Web Services’ latest Gen AI Adoption Index found that almost half (45%) of senior IT decision-makers across nine countries, including the UK, chose genAI as their top budget priority, far ahead of planned IT spending in areas like security tools, compute power, storage and physical hardware.

Put together, these trends show that while the brakes are being applied to broader IT services spending, companies aren’t retreating from tech – they’re just moving the money elsewhere, with AI and employee-focused solutions becoming top priorities.