Snapshot of the digital market in 2023: Trends, growth and prospects

Despite an unfriendly 2023, digital remains resilient

2023 was a year marked by macroeconomic concerns such as recession fears, rising interest rates, and geopolitical tensions. These events were not very favourable for the Small & Mid cap market. Nevertheless, the digital market proved resilient in its development and innovation.

The French digital market is worth €66.2 billion, with growth of +6.5% in 2023. Despite slower growth than in 2022 (+7.5%), this is nevertheless indicative of the sector’s resilience against a backdrop of economic and geopolitical instability. Based on Numeum’s segmentation, this analysis of the digital market has been carried out looking at the following companies:

• Software publishers experienced growth of 10.3% over the year. In particular, this is due to the growing demand for solutions that speed up software innovation for all industries that need to carry out their digital transformation;
• DSCs, or Digital Service Companies, saw weaker growth of 4.1%. Nevertheless, the need for digital services remained strong, whether in integration, outsourcing or cybersecurity;
• In the case of IT consulting companies, the growth rate was +5.5% in 2023, reflecting the importance of IT expertise for companies’ IT problems.

Key market trends

The digital market has been spurred by innovation and technological advancement, as well as business investments in cutting-edge tools and services.

Cloud C&SI needs

According to Numeum, Cloud C&SI (Consulting and Systems Integration) is one of the main growth drivers in the market, thanks to the need to transform and modernise cloud solutions. Cloud C&SI has generated €18.6 billion, with growth of 17.5% to 2023.

The rapid rise of AI and Big Data

2023 saw the democratisation of AI and Big Data in all sectors of activity. The rapid progress of generative AI has transformed the way data is used and the decision-making process. Big Data saw strong growth of +18% over the year, or €3 billion, thanks in particular to the use of AI in the collection and use of data. Following on from this, the emergence of AI tools has popularised its use, with growth of +22.3% to reach a volume of €1.1 billion in 2023.

• European Union approves draft regulation on artificial intelligence

The necessity of cyber security

The increase in complex cyber threats has prompted companies to invest in and outsource cybersecurity management services. In 2023, the cybersecurity segment accounted for €3.8 billion of the market, with growth of 10.2%.

Responsible digital technology

As part of ESG initiatives, a growing number of impact-conscious companies are adopting a responsible digital approach. The aim is to raise awareness and adopt sustainable and ethical practices in the digital sector to respond to societal and environmental challenges.

• The rise of ESG due diligence

Tensions on the hiring front

Recruitment in the digital sector has increased, but to a lesser extent than in 2022. Digital companies are still attracting young graduates and are recruiting more senior and experienced profiles in 2023. However, the hiring of experienced professionals remains under pressure, owing to the trend of insourcing expertise within client companies. This has resulted in increasing competitiveness and rising pressure on remuneration for these positions.

M&A transactions in the digital sector in 2023

An all-time low

In 2023, the market reached its lowest level in ten years. According to Refinitiv, the total value of M&A transactions completed between January and September 2023 was $1,975 billion globally. This compares to $5.8 trillion in total M&A activity in 2021, which was considered a year of recovery following the covid pandemic.

• The mergers and acquisitions market hits an all-time low

A return to normality

According to Avolta, 2023 will be seen as a return to normal in terms of transaction volumes and valuation levels. Indeed, the cumulative amount raised by French start-ups reached €8 billion in 2023, a significant decrease compared to 2022 (€15 billion raised in 2022).

• French start-ups: Top fundraising events in the first quarter of 2023

Soaring interest rates

This cooling in activity is also reflected in the rise in interest rates, which has drastically slowed the euphoria of valuation levels in the digital sector. In the FinTech and MedTech sectors, valuations have fallen by -24.9% and -32% respectively. As a result, investors have been much more cautious in structuring financing packages and acquiring stakes, favouring profitability over hyper-growth.

• Fundraising: the party is over for French start-ups

Nevertheless, the resilience of the digital sector and technological innovation encouraged M&A transactions and fundraising during the year, such as:

• Pennylane (France) raising €30 million from DST Global (Hong Kong);
• The acquisition of Ordina (Netherlands, revenues of €430m in 2022) by Sopra Steria (France) at a valuation of €518m;
• The acquisition of cloud specialist BTC (Japan) by Capgemini (France) to strengthen its position in the cloud and meet Japanese demand;
• The acquisition of Protinus (Netherlands), a leading provider of hardware, software and services to the public sector, by Prodware (France), a major player in the digital transformation of companies;
• The acquisition by Capza (France) of a minority stake in Asys (France), a €20 million HRIS software publisher.

2024 prospects

For 2024, the market is expected to grow at a slightly slower rate of +5.8% to reach an estimated value of €70 billion. The market appears to be driven by continued demand for software, digital services and artificial intelligence tools, enabling it to maintain growth in a challenging economic environment.

The main factors likely to have an impact on the outlook for 2024 are:

• Continued development of generative AI and Deep Learning: as the use of these technologies becomes more accessible, the impact on business innovation and efficiency is likely to increase;
• The need for skilled talent: addressing the talent shortage in the sector will remain a priority, with a trend towards recruiting older, more experienced professionals;
• Demand for digital services across all business sectors: as businesses continue to transform digitally, demand for digital and IT services will continue.

• What are the forecasts for French tech in 2024?

In 2023, the digital market proved resilient and maintained its growth thanks to innovation and the constant needs of businesses. To preserve a competitive advantage in 2024, digital companies must seize opportunities for innovation and acquisitions within a responsible framework.

• AURIS Finance stands out in investment bank rankings

Sources :

• Numeum : https://numeum.fr/actu-informatique/communique-de-presse-le-numerique-confirme-sa-croissance-soutenue-avec-65-en-2023
• Xerfi : études « les services numériques, septembre 2023 » et « les éditions de logiciels, juin 2023 »
• Avolta Partners : étude « VC & Exit Multiples France, 2023 »
• AURIS Finance : https://auris-finance.fr/marche-fusions-acquisitions-bas-historique/
• Les Echos : https://www.lesechos.fr/finance-marches/ma/les-fusions-acquisitions-chutent-a-leur-plus-bas-niveau-en-dix-ans-1983027
• Option Finance : https://www.optionfinance.fr/entreprise-finance/les-levees-de-fonds-en-2023-ont-marque-un-retour-a-la-normale-des-valorisations-des-start-up.html
• Bercy Numérique : https://www.bercynumerique.finances.gouv.fr/5-leviers-qui-boostent-le-secteur-du-numerique-francais
• Décideurs Magazine : https://www.bercynumerique.finances.gouv.fr/5-leviers-qui-boostent-le-secteur-du-numerique-francais
• Le Monde Informatique : https://www.lemondeinformatique.fr/actualites/lire-l-emploi-dans-les-start-ups-it-francaises-en-perte-de-vitesse-92694.html
• Capza : https://capza.co/fr/news/capza-entre-au-capital-de-la-hr-tech-asys/
• Prodware : https://www.prodwaregroup.com/fr-fr/communique-de-presse/prodware-fait-lacquisition-de-protinus/
• Capgemini : https://www.capgemini.com/fr-fr/actualites/communiques-de-presse/capgemini-renforce-son-offre-en-cloud-et-digital-au-japon-avec-lacquisition-de-btc/