Why Information Technology Services Interest Me

By Shilpa Mehra, portfolio manager of Fidelity® Trend Fund

I’m interested in information technology (IT) services because I expect companies here to benefit from growing demand as more businesses seek help navigating their digital transformations.

Digital capabilities are becoming increasingly critical to companies because they separate the ‘haves’ from the ‘have-nots.’ Specifically, the ‘haves’ continue to recognize the necessity of continuously investing to upgrade their systems and platforms, while the ‘have-nots’ are starting to realize the importance of investing in technology so as not to lose market share.

The recent COVID-19-driven lockdowns made this differentiation between the ‘haves’ and ‘have-nots’ very apparent. Companies that had the digital infrastructure in place could pivot and allow employees to work from home fairly seamlessly, sell products online and provide frictionless interactions for customers. Conversely, companies without these capabilities struggled.

The coronavirus pandemic has accelerated a number of secular trends that also are likely to boost demand for IT services going forward: the shift from offline (or in-person store purchases) to online (e-commerce), the move from cash payments to card and mobile payments, and the transition from hardware mainframes to the cloud.

The IT services industry is quite large (roughly $1 trillion), but very fragmented, with no one vendor having more than 5% market share. It’s also very labor intensive and highly dependent on attracting the best talent. As a result, I’m focused on companies that have reputations for delivering the best IT solutions, which in turn helps them draw new clients and attract the top-notch talent that keeps clients coming back. These companies also can help management teams plan for their digital needs three, five or 10 years down the road.

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