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STAMFORD, Conn., July 23, 2008 View All Press Releases

Gartner Says Worldwide IT Services Market On Track to Grow 9.5 Percent in 2008

Market Expected to Top $1 Trillion by 2012

Despite the uncertain economic situation, the IT services market is expected to remain strong as worldwide IT services end-user spending is forecast to exceed $819 billion in 2008, up 9.5 percent from 2007, according to Gartner, Inc. Analysts said results in the first half of 2008 have shown mixed results.

“In the first quarter of 2008, results for the top nine providers came in above expectations, and several market leaders have expressed optimism for the remainder of 2008. In addition, the continuing decline of the U.S. dollar has, and will continue to contribute to market growth as expressed in U.S. dollars,” said Kathryn Hale, research vice president for Gartner. “However, at the recent Gartner Outsourcing Summit in Washington D.C. in May of this year, some providers indicated that some outsourcing contract signings are being delayed and some projects are being placed on hold.”

Core outsourcing (IT management and process management) remains the highest growth area in the market. In 2008, core outsourcing services are on track to represent 42 percent of total worldwide IT services end-user spending. Buyers look to process management — core business process outsourcing (BPO) — as a remedy for cost control for short-term impact, and the increase in availability of global delivery capabilities makes BPO an attractive cost option, bringing more companies to BPO that would have considered it in the past.

The consulting and development and integration (D&I) segments continue to exhibit steady growth (see Table 1). These segments are fueled by demands such as overall cost reduction, combined with demand for projects that can improve profitability or revenue growth. The worldwide consulting and D&I segments combined are forecast to reach $327 billion in 2008, up 10.1 percent from $297 billion in 2007.

Table 1
Worldwide IT Services End-User Spending by Segment (Millions of Dollars)

Segment

2007

2008

2009

Consulting

64,656

71,002

75,500

D&I

232,452

256,045

272,356

IT Management

201,222

220,606

234,433

Process Management

110,694

121,353

132,250

Hardware Support

89,654

94,691

97,269

Software Support

49,346

55,409

60,636

Total Market

                      748,025

819,106

872,454

Source: Gartner (July 2008)

“Although we expect continued strong growth in IT services, there are two causes for concern,” said Ms. Hale. “First, the rate of innovation in providing new service offerings is sporadic, at best, and strong return-on-investment stories are hard to come by. At the same time, innovation in delivery is not growing as fast as hoped: Industrialization is being adopted slowly. A second fundamental problem in IT services is the inability of providers to provide compelling value statements about the services they provide, whether in offerings or delivery.”

“The result from this is a common buyer mentality that focuses on IT cost takeout and adopts a ‘lowest cost wins’ decision-making in its services and sourcing decisions,” Ms. Hale said. “This approach inhibits the needed innovation for IT to ‘make a difference’ and add value and also restricts the level of innovation that providers are able to offer. Buyers that are unable to work closely with providers on innovation in all its various forms are inhibiting the growth of this critical sector in IT.”

Additional information is available in the report “Forecast: IT Services, Worldwide, 2008–2012.” This report examines the state of the worldwide IT services market, looks at what trends are developing and provides a full forecast for the market. The report is available on Gartner's Web site at
http://www.gartner.com/DisplayDocument?ref=g_search&id=713907&subref=simplesearch. Gartner analysts also examine the economic impact on the IT Services market in the report “Q&A: Economic Impact on IT Services, Midyear 2008 Update.” The report is available on Gartner’s Web site at http://www.gartner.com/DisplayDocument?ref=g_search&id=713411&subref=simplesearch.

 

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