It is very rare for old contracts or contract extensions for consultants and teams to be signed at lower prices. Price increases have certainly been minimal this time around. In many listed companies, 75–85% of revenue comes from “recurring services,” follow-on orders, or contracts for consultants already working for the client. There have certainly been lower prices in new tenders. This means a large portion of the workforce has been working at the old rates. The firms that are more dependent on new projects are the ones that have suffered the most. There are fewer projects, and competition has likely driven down prices in those cases.
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If the Arvopaperi article doesn’t convince you or answer your question, then perhaps you’ll have more faith in Inderes’ recent analysis of the IT services sector. IT-palvelusektorin arvostustasot 7-vuotisen seurantahistoriamme pohjilla, aiheesta? - Inderes. If even this doesn’t convince you, you can of course wait for valuation levels to rise and only then start investing in earnest 
@Saarelainen, I wonder if the request was due to the article being behind a paywall—a sincere wish, perhaps?
At least the same thought crossed my mind when I saw the link, but I didn’t think to ask. The headline is interesting.
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Interesting report, but I probably don’t have permission to share it. As a summary of the report, I can however state: IT service sector stocks are at historic lows. Inderes does not believe that the sector’s future prospects have changed so much that the undervaluation would be justified.
Additionally, I can state that Inderes’ analysis coverage is truly broad and in-depth. Even though I don’t agree with them on everything, there are gems and information in there that no individual investor can reach on their own.
@Saarelainen, the Arvopaperi article is behind a paywall. That’s why I asked, as I can’t access it myself. It would be in accordance with the forum’s spirit and media rules to summarize the article. Quoting the entire article directly is of course forbidden, but if there are quotes from any expert, for example, those can be shared with the whole world as is.
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Every now and then, I wonder if there is a bit too much gloom and doom observable in the sector. There are, however, early signs that the situation is slowly turning for the better.
For example, Digia is churning out obscene amounts of cash flow. Even last year, free cash flow minus lease liabilities was about ten percent of the market cap. That leaves a nice amount of money for developing the business.
As a company that has made many acquisitions, the depreciation and amortization base is significant enough that if adjusted figures aren’t used or cash flows aren’t examined more closely, the baby can easily be thrown out with the bathwater.
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Ok, here is Arvopaperi’s list:
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Software is selling like hotcakes in 2024, and IT services are also expected to grow. Softa menee kuin kuumille kiville | Tivi
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Nylund describes the current situation in Joni’s interview, stating that “we are now scraping the bottom of a certain kind of trough”. Let’s hope so 
https://www.youtube.com/watch?v=9IQ6dG8XLEc&t=1034s
Market outlook extracted from Gofore’s financial statements release. Nothing special under the sun here. 
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Things are happening in the Swedish M&A market. CombinedX has acquired an Infor solutions specialist consultancy that is significant in size relative to its own (19% of 2023 revenue). It has about 80 experts and a revenue of 142 MSEK in 2023. Profitability was at a weak level last year, and according to the press release, this is largely due to costs related to a dispute with Columbus. Unfortunately, the company’s releases are only available in Swedish.
https://www.combinedx.com/sv/investerare/ir-nyheter/?pageId=BACE9A5F8486EE8B
Here are some of my more detailed thoughts on the deal from the CombinedX thread.
https://keskustelut.inderes.fi/t/combinedx-joukko-teknologiakeskittyneita-it-palveluyhtioita-ruotsista/46387/9?u=frans-mikael_rostedt
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The Finnish IT services market appears increasingly divided. Pure project consulting firms (Vincit, Siili, Witted) continue to struggle. Companies with specialized expertise and product business are succeeding (Gofore, Innofactor, Digia). Vincitin liikevaihto putosi vuoden lopussa, ennakoi laskun jatkuvan – "Oma muutosmatkamme on hyvällä polulla” | Tivi
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One could imagine that the strong players mentioned will only get stronger, at least in the near term. It’s a talent-driven business, and they can recruit experts from weakening competitors when they have more projects to sell them into. Change negotiations (YT-negotiations) etc. tank the morale drastically when people are used to good times.
There probably aren’t many firms that have grown in the last 6 months. From what we’ve seen in Witted Insight, some small companies are growing, but they’ve been few and far between. 2024 is interesting, though. If I had to guess, I’d say that private demand could start to recover this year. In that regard, the bottom was reached last spring, and there’s been a modest move upwards since then.
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My industry contacts say that demand from banks has strengthened even further and industrial demand has recovered in the early part of the year. Time will tell if this will be reflected in the companies’ figures.
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More evidence of the demerger: Siilin liikevaihto laski loppuvuonna – ”keskityimme turvaamaan kannattavuuttamme” | Tivi.
Generative AI is starting to show its power in service companies. Tekoäly hoitaa 700 ihmisen työt: Klarnan mukaan irtisanomiset eivät liity asiaan | Tivi. This creates new opportunities for IT service companies. However, jobs in the sector will likely not grow, as generative AI is also replacing human labor in IT companies. Coding, testing, and customer support can already be partially replaced by AI instead of human work in the near future. In the IT service industry, the winners will be those who are best at commercializing their AI offerings and those who know how to best trim their cost structures by utilizing AI.
To add to the previous point. The IT service companies that will succeed the fastest in adopting AI are those whose offerings and services are largely productized and standardized. Companies whose services are based on the specialized expertise and personal qualities of their staff will inevitably face more challenges in utilizing AI. At least in the early stages.
@Joni_Gronqvist and @Frans-Mikael_Rostedt have put together a summary of the IT services sector’s Q4. 
In general, the Q4 earnings season was exceptionally well in line with our expectations. The organic development of listed Finnish IT services companies was at the level of the comparison period and weakened slightly from Q3. Cost savings did not yet fully kick in during Q4, and profitability declined in line with our expectations. The growth of other Nordic companies in Q4 was also at a slightly better level than listed Finnish companies, and profitability was at the same level. For the full year 2023, revenue grew slightly on average and profitability was nearly at the level of the comparison period, which can be considered a defensive victory given the economic situation. In the big picture, the generally difficult economic situation continues to dampen customer demand and causes various symptoms in the sector, such as pressure on customer pricing.
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The same guys talked about the aforementioned theme in a 36-minute video.
Topics:
00:00 Introduction
01:23 Growth slowed down significantly year-on-year
06:37 Cost savings have not yet taken effect
10:05 The sudden slowdown in spring 2024 was sharp
15:10 Performance of Nordic peers
17:31 Digia
18:50 Digital Workforce
20:25 Gofore
21:23 Innofactor
22:45 Loihde
24:47 Netum
26:30 Siili
27:58 Solteq
29:55 Tietoevry
31:44 Vincit
33:48 Witted
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