New Zealand IT services revenue grew 1.9 per cent year-on-year, reaching $3.4 billion in 2018, according to market tracker IDC.
That growth rate was below the 2.8 per cent IDC forecast last year.
Managed services revenue made up the largest portion, however, the project oriented market achieved the highest year-on-year revenue growth.
The largest revenue shares in the project market in 2018 went to system integration followed by custom application development services.
"Instead of developing new applications from scratch, many organisations are utilising service providers' systems integration skills to integrate SaaS applications or their custom development skills to modernise existing applications," Chayse Gorton, A/NZ market analyst for IT services, said.
Gorton said as organisations transition from on-premise software deployments towards cloud-based SaaS models, the need for systems integration services tends to become imperative.
"Organisations that implement SaaS solutions often have investments in on-premise software, hence it is imperative that cloud data can integrate with these on-premise applications."
Many New Zealand organisations have taken a lift and shift approach to cloud software deployments, Gorton said.
This can provide benefits associated with reducing on-premise infrastructure costs but without rearchitecting the application the full cost benefits of the cloud may not be realised and performance issues may arise.
IDC believes that the trend of modernising existing applications will continue throughout 2019. However, when an existing application comes to the end of its life, organisations will, in many cases, be inclined to shift to a SaaS model.