New Zealand
it market trends
In the wake of a turbulent 2024, marked by consecutive recessions and a significant economic downturn, New Zealand’s IT sector is exhibiting signs of a slow but steady recovery this year. Although ongoing global trade tensions continue to trigger macroeconomic instability, revenue from the IT services sector is projected to grow from NZ$7.12 billion (US$4.23 billion) in 2025 to NZ$8.52 billion (US$5.06 billion) by 2029, at a compound annual growth rate (CAGR) of 4.57%.
According to the International Monetary Fund (IMF)’s forecast, New Zealand’s real GDP, which contracted by 0.5% year-over-year (y/y) in 2024, is projected to grow by 1.4% in 2025 and accelerate to 2.7% in 2026. As the Reserve Bank of New Zealand (RBNZ) continues to adjust the official cash rate to influence interest rates and manage inflation, organisations across both the public and private sectors are expected to continue expenditure rationalisation and operational optimisation efforts in 2025. The focus is on doing more with less, as a pragmatic approach is key to navigating the headwinds and tailwinds impacting the domestic market.
In the face of constantly evolving market dynamics, various challenges, and underlying opportunities, New Zealand’s IT sector is at a pivotal inflection point. Once believed to be recession-proof, the sector is expected to stabilise after witnessing unprecedented budget cuts, layoffs, and hiring freezes in 2024. Organisations face the conundrum of accelerating their digital transformation and cutting-edge technology adoption while dealing with acute skills gaps and a shortage of top-notch talent in AI, cloud computing, cybersecurity, big data, and other in-demand skillsets. Boosting operational agility, change-readiness, and customer-centricity remains mission-critical, as CIOs steer their workforce to adapt, evolve, and thrive amidst the uncertainty.
Amidst the ever-changing regulatory landscape, many organisations across New Zealand have been prompted to drive initiatives to boost compliance and elevate their risk management and cybersecurity.
Josh Ebenezer, Consultant | TEKsystems, New Zealand
After 18 months of significant public sector layoffs and stunted private sector growth, the tide is turning in 2025. A robust IT infrastructure is key as organisations enhance and scale their customer-facing initiatives.
Sam Graham, Consultant | TEKsystems, New Zealand
2. The Future of Work is Evolving as WFH Flexibility Becomes Increasingly Important to Kiwis
The flexibility to work-from-home (WFH) gained prominence during the COVID-19 pandemic, as several organisations across the public and private sectors were prompted to manage their workforces remotely. Since then, WFH flexibility has become a crucial benefit that Kiwi employees expect from their employers, alongside attractive remuneration and career progression opportunities. In fact, 50% of Kiwis would reconsider their future with their current employer if their WFH benefits were compromised. Additionally, 47% of job seekers are looking for hybrid or fully remote work arrangements, and 38% consider the absence of WFH options a “deal breaker” when choosing a new role.
With the increasing demand for WFH flexibility, employers have had to recalibrate their workforce management strategies and alter their policies to meet the needs of their employees. Currently, 72% of organisations are providing some form of WFH flexibility, with the IT, energy and utilities, and public sectors leading the way. The ability to offer greater flexibility and enhance employee engagement and satisfaction is vital for the long-term retention of high-calibre talent, particularly across in-demand skillsets.
3. Widening Skills Gaps and an Acute Shortage of Top-Notch Digital Talent Continue to Hinder the Digital Transformation Agenda
Lacking the specialised talent and subject-matter expertise in AI, machine learning, cybersecurity, cloud computing, big data analytics, and other in-demand IT skillsets, several organisations in New Zealand are underequipped to drive their digital transformation initiatives. Although hiring AI-skilled talent is a major priority for 63% of organisations, 70% are struggling to find the necessary AI talent, and 79% lack the know-how to implement AI training programmes within their workforce. CIOs across Aotearoa face the daunting challenge of accelerating strategic digital initiatives while coping with limited resources and insufficient human capital at their disposal.
The shortage of top-notch talent across the SDLC not only slows down the pace of digital transformation but also impacts overall productivity, innovation, and competitiveness within the workforce. With hiring new talent proving to be increasingly difficult amidst cut-throat competition, it is important for organisations to focus on upskilling their existing workforce and harnessing their full potential. Addressing digital skills gaps through targeted training and capacity-building programmes, as well as strategic partnerships with educational institutions, is crucial for organisations to successfully navigate the evolving digital landscape and bring their transformation agenda full circle.
4. AI Adoption is the Headline Act as Organisations Ramp Up Efforts to Harness its Full Potential.
With AI's immense potential as a pioneering general-purpose technology, it is unsurprising that 97% of organisations in New Zealand are accelerating their AI deployment with increased urgency. Notably, 36% of these organisations plan to allocate over 40% of their IT budget to support AI initiatives over the next four to five years. The primary uses cases of AI include enhancing employee productivity, augmenting data analytics, improving customer service, bolstering risk mitigation and cybersecurity, and optimising IT infrastructure.
New Zealand’s public sector is leading AI adoption efforts through two flagship initiatives – the AI Activator and GovGPT. The AI Activator aims to enable businesses to seamlessly integrate AI tools and overcome barriers to adoption, with projections indicating it could contribute $76 billion to New Zealand’s GDP by 2038. GovGPT, an AI-powered chatbot, is designed to enhance accessibility to government services, improve data accuracy and security, and elevate the user experience for the public.
In addition to AI adoption, there is a growing demand for specialised IT services, including cloud computing, cybersecurity, data science, and analytics. The emergence of new-age technologies and breakthroughs within the IT sector are playing a vital role in stabilising and supporting New Zealand’s digital economy for 2025 and beyond.
