Conference Call Replay | “It was the best of times, it was the worst of times…” Initiating coverage of IT Services and Processors

    We initiated coverage of the IT Services and Processors sector covering six stocks: ADP, Paychex, IBM, Accenture, DXC, and Cognizant.

    We expect consistent 4% growth from the $700 B global IT Services market over the next 3-5 years, as IT Services remains ~27% of total Enterprise IT budgets and also expands beyond the CIO shop. Below the surface, however, the tectonic shift in Enterprise IT spending towards Digital and Cloud – now 5+ years in, but still in the early innings (Cloud is still <10% of total IT spending) will create increasingly wide dispersion in growth rates among service lines. We estimate Digital and Cloud are 30% of IT Services, growing ~25%, while “all other” is declining 5%. This dispersion creates clear ‘have’s’ and ‘have nots’ among IT Services players, which we attempt to quantify with our proprietary Digital Capability Scorecard.

    We expect slightly faster 6% growth from the ~$35-40 B U.S. HR Services market, as U.S. companies outsource more of their estimated ~$150 B in total HR spending to 3rd-party providers, driven by adoption of fully outsourced HR models (PEO, ASO) by SMB’s, and new services, such as recruiting, HR benchmarking and analytics, and payments to contract workers.

    So, how do our covered companies fare relative to these industry outlooks...?

    In a clients-only conference call, Lisa discussed our outlook for the IT Services and Processors sector, trends we believe will shape the industry over the next 3-5 years, and our perspective on our covered stocks. Bring your questions and topics of interest – she’ll leave plenty of time for audience Q&A as well.

    Date: Friday, October 5, 2018

    Time: 10:00 am ET

    Conference Call Materials: Click here

    Conference Call Replay: Click here