FDI in computer and software services in 2019 and 2020

Despite being a leading sector for foreign direct investment (FDI), IT and software services have not been immune to the disruption caused by the Covid-19 pandemic. Overall, the crisis is widely seen as having accelerated digitalization across all sectors, but GlobalData’s FDI project database shows that new investment projects in IT and software services during this period have actually declined at a significant rate.

As for new projects in IT and software services, GlobalData’s project database shows that there were 2,239 projects in 2020, down 24.4% from 2,962 projects in 2019. The United States and Germany recorded an increase of 1.1% and 7%, respectively, in FDI. projects from 2019 to 2020, but the next three countries in the top five investment destinations saw declines. The number of projects in the UK decreased by 39.7%, India by 37.3% and Singapore by 21.4% between 2019 and 2020.

Expansion projects showed a more positive picture, with the number of existing projects receiving investment increasing by 4.9%, from 430 projects in 2019 to 451 in 2020.

What are the main destinations of FDI in IT and software services?

Western Europe was the top region to attract FDI in IT and software services in 2019 and 2020. With 2,026 projects, the region attracted 39% of all announced or open projects worldwide during of this period.

Asia-Pacific ranked second with 25% of all announced or open projects, followed by North America, then Central and Eastern Europe and the Commonwealth of Independent States, followed by the Middle East and of North Africa. South America, Central America and the Caribbean, and Sub-Saharan Africa all had a number of projects below 200.

The United States ranked first among countries attracting FDI in computer and software services in 2019 and 2020, with 559 projects announced or opened during this period. The UK ranked second with 489, Germany third with 445, India fourth with 327 and Singapore fifth with 234.

Among these top five global destinations, the growth rate of FDI projects from 2019 to 2020 showed very different results. While FDI in computer and software services increased by 1.1% in the United States from 2019 to 2020, the United Kingdom saw a massive decline of 39.7% over the same period. While Germany saw its foreign investment increase by 7% between 2019 and 2020, that of India fell by 37.3% during the same period. Singapore’s FDI in computer and software services also fell by 21.4% in 2020.

According to Glenn Barklie, chief economist at Investment Monitormany large companies have been in the spotlight, expanding their bandwidth as generation work from home was born. However, the online element is only a part of the software industry. “Like other sectors, the software industry has had to deal with country shutdowns, which has made new overseas operations more difficult to achieve,” Barklie says. on the operations they had instead of generating new ones. Supply chain issues for electronic components such as semiconductors have also impacted FDI flows. That said, it should still be noted that the software sector remained the first FDI sector with a certain margin.

What are the main sectors and business functions of FDI in computer and software services?

Sales, administration and marketing is by far the business function that attracted the most (3,161) greenfield FDI projects in IT and software services in 2019 and 2020. Research and development is ranked second, with a significantly lower number of projects at 829. and professional services ranked third with 652 projects.

Software as a service (SaaS), operating systems and applications was the top sector for FDI projects in IT and software services in 2019 and 2020, with 2,717 projects. Computer programming activities ranked second at 867, fintech at 682, then web portals at 330. Computer games posted the fewest number of IDE projects at 171, but was the only sector to show a growth between 2019 and 2020, with a 28% increase in the number of projects. Numbers. This growth contrasts with the decrease in the number of projects between 2019 and 2020 for all other sectors. The SaaS sector fell by 24.1% in the number of projects, with web portals showing the worst performance with a 65.9% drop in the number of projects.

Where are the major investors in IT and software services located?

The United States was the top investor in investment in FDI projects in IT and software services throughout 2019 and 2020, although the number of projects leaving the country fell by 40.5% between 2019 and 2020. The UK was the second largest source country for global investment in IT and software services, although again the number of projects fell, this time by 24.9% between 2019 and 2020. The other top source countries for FDI projects in computer and software services were Germany, France, Japan, Switzerland and India in order of investment value.

GlobalData research shows that while Sweden ranks ninth highest outbound investment in IT and software services, it is the only country among the top ten source countries to have increased investment between 2019 and 2020. the number of Swedish outbound investment projects were relatively small, at 58 in 2019 and 71 in 2020, they increased by 24.4% during this period compared to an overall decline in investment. Other countries that continued to invest during the recession are China, Australia and Austria.

What are the top countries overall for FDI in computer and software services?

The United States, the United Kingdom and Germany are the three undisputed leaders in terms of FDI in computer and software services at the national level. All three top the charts of inward and outward FDI and, combined, they accounted for 28.7% of global FDI inflows and half of FDI outflows in computer and software services in 2019 and 2020.

Although the United States was the undisputed leader in the number of projects, both for inbound and outbound investment, Germany recorded a 7% growth in the number of inbound investment projects against a general trend of growth negative number of projects.

The UK was clearly second in number of projects for inward and outward FDI in IT and software services, but saw sharp declines in the number of projects for inward and outward investment between 2019 and 2020.

Barklie says the software industry is expected to return to positive growth in 2021. In fact, the number of projects is expected to be 20% higher than in 2020, and the software industry will continue to be a key driver of the total number. of IDE projects. moving forward in a post-pandemic world.

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