The Information and Communication Technology (ICT) sector faces a period of consolidation as firms look to expand to meet growing demand.
A new report from the Westpac Bank shows Covid-19 has accelerated the demand for ICT products, as businesses looked to lessen the effects of the pandemic and shift their businesses online.
Westpac industry economist Paul Clark said: "With the digital genie now out of the bottle and firms more open to new ways of working, we expect that spending on ICT products like cloud computing, social networking software and collaboration platforms will continue to be buoyant".
However, he predicted the appetite for new ICT services would lead to mergers and takeovers in the industry.
"This is a sector that's got a multitude of firms, many, many small firms and they just lack the size and scale to be able to do that and I think some of those will be targets of medium-sized and larger firms who are looking to complement their skills base.
"It's really about size and scale."
The report said the export market was a potential area of growth for New Zealand firms, as the global ICT industry generated $5 trillion in revenue a year.
"In a lot of ways, we are quite nimble... we have this 'can do' attitude that will stand us in good stead.
"We've also shown a high degree of innovation in this industry and I think it all looks good for exports."
However, Clark said the industry was at risk of being unable to take advantage of these opportunities because of a shortage of highly-skilled graduates in the country.
"I think [the New Zealand education system] delivers high quality graduates... it's whether or not there are enough going through the system to address the requirements of localised ICT firms and I would suggest that given the pace of growth we're likely to see in ICT that's going to become a binding constraint."
The ICT sector employs about 54,000 people in New Zealand and with revenue of $18 billion annually.