Services

Statistics :

Worldwide IT Services Forecast by Region (Millions of U.S. Dollars)

	2002	2003	2004	2005	2006
North America	253,106	261,229	275,151	292,249	312,077
United States	237,717	245,070	257,863	273,564	291,782
Canada	15,389	16,159	17,288	18,685	20,296
Latin America	18,762	19,034	20,054	21,780	23,760
Western Europe	157,618	181,531	186,713	194,442	203,355
Central and Eastern Europe	4,445	4,751	5,100	5,498	5,947
Middle East and Africa	7,412	7,899	8,499	9,210	10,005
Japan	65,547	71,673	75,518	80,343	86,151
Asia Pacific	29,079	32,454	35,061	37,895	41,164
Total	535,970	578,570	606,095	641,417	682,460

Source: Gartner Dataquest (November 2003)



Top 5 Worldwide IT Services Vendors Revenue and Market Share
(Millions of Dollars)

	2001 Revenue	2001 Market Share (%)	2002 Revenue	2002 Market Share (%)
IBM	40,664	8	40,139	8
EDS	20,702	4	21,122	4
Fujitsu	14,339	3	14,483	3
Hewlett-Packard	13,053	2	12,460	2
Accenture	11,534	2	11,506	2
Others	437,529	81	436,262	81
Total Market	537,822	100	343,259.20	100

Source: Gartner Dataquest (August 2003)


Quotes:

"'Economic challenges and the need to penetrate new markets are serving as catalysts for IT services providers to seriously investigate and consider all possible strategies for growth in their businesses,'" said Michael Haines, principal analyst for Gartner. "'One of the strategies is to leverage other IT services companies, either as a target market or as a conduit to new markets.'"

"'The portion of services sales made via other IT services companies may be driven higher than predicted because of changing customer preferences to deal with less providers, coupled with the emergence of services value chains,'" said Haines. "'These market shifts will serve as catalysts to accelerated levels of collaboration that will find other IT services companies becoming a more significiant buying audience.'"

Source: "Gartner Survey Shows 80 Percent Of IT Services Companies Are Selling Their Services Via Other IT Services Companies," August 12, 2003

Sourcing IT work from anywhere in the world at the best prevailing prices is now becoming mainstream for application-related services. Early adopters are actively exploring beyond application-related services, including business process outsourcing (BPO), call centers and infrastructure services, according to Gartner, Inc.

"'As the offshore providers increasingly compete with the incumbent global majors, and start to take business away from them, a competitive response by the global majors is giving rise to structural changes in the global services marketplace,'" said Partha Iyengar, research vice president in Gartner's software research group. "'This will see the emergence of a new order of 'top-tier' Global IT service providers, some of whom will be the current global leaders and some will be from the ranks of the Tier 1 Indian service providers.'"

"'As enterprises evaluate the leveraging of offshore resources, understanding the associated risks and developing mitigators will be essential to the long-term success of the strategy,'" said Frances Karamouzis, research director for Gartner's sourcing research group. "'Risks exist in any project using external service providers (ESPs), and enterprises must understand the differences between domestic and offshore sourcing and use risk assessment framework to understand the risks of each stage of an offshore relationship.'"

Source: "Gartner Says Sourcing IT Services Through a Global Delivery Model Is An Irreversible Mega-Trend," June 23, 2003

The IT services industry suffered through its most difficult year on record in 2002, however, the market will begin a slow recovery in 2003, as it is forecast to grow 3.5 percent, to $555 billion, according to Gartner, Inc. (NYSE: IT and ITB). Gartner analysts say that users will continue to take a cautious approach to IT spending, and are considering their IT investments far more critically than before.

"'This faster growth will result from vendors selling transformational outsourcing services that enable buyers to reduce their costs and improve their IT infrastructure,'" said Kathryn Hale, principal analyst for Gartner's worldwide IT services group. "'Outsourcing replaces internal IT spending and is often funded outside of IT budgets, so growth in outsourcing is possible even in the face of flat IT budgets.'"

"'Signs indicate that IT budgets, including spending on IT services, will increase in mid-to-late 2004 to early 2005, depending on the region,'" said Robert De Souza, industry analyst for Gartner's IT services group. "'This recovery would result from improving business confidence and a modest, but growing need for users to maintain a competitive infrastructure, while also managing costs.'"

Source: "Gartner Says Worldwide IT Services Revenue to Grow 3.5 Percent in 2003," June 3, 2003

"'Project-based services, consulting and development and integration, performed the worst, while managed services, such as outsourcing and process management, enjoyed the highest growth rate,'" said Kathryn Hale, principal analyst for Gartner's worldwide IT services group. "'Many organizations are still seeing outsourcing as the best way to minimize costs in an economy of prolonged uncertainty in which very tight budgets are the norm. Project-based services suffered because users avoided large or technologically challenging projects, and because of price pressure on commodity-like work, which was further driven by growth in offshore services.'"

Asia/Pacific and Japan were the only regions to show growth in IT services in 2002. However, politically and economically, 2002 was a trying transitional time for multinational and local service providers in Asia. "'Much of Asia is dependent on the global economy and its attracting developed markets' investments,'" said Hale. "'Although, overall, the region had a growth rate of three percent, 2002 ended with every market impacted by the global slowdown and performing much lower than expected.'"

Source: "Gartner Says 2002 Was the Most Difficult Year on Record for Worldwide IT Services Industry," May 13, 2003

"'The issue of the budget is understandable, given the economy, but it translates to a reluctance to make the investment if the payback is in question,'" said Robert Igou, principal analyst for Gartner's IT Services group. "'The most alarming concern for support providers is that e-support solutions are not generally seen as effectively solving support incidents. If this perception is not remedied with the evolution of improvements, it could have a retarding effect on the demand for this technology.'"

"'Support providers must consider these concerns and provide metrics for establishing benchmarks as a priority,'" said Igou. "'None of these improvements really relate to the solution or technology itself, so solution vendors should be pleased. However, if the solution vendor is associated with a poorly performing Web site via a brand designation, they will suffer brand contamination as a result.'"

"'This is not to say that automated solutions can resolve all incidents, or that they can always save money, but that inserting automation into the support process can reduce the amount of human assistance that needs to be applied in the end,'" said Igou.

Source: "Gartner Survey Shows Enterprises List Budget Restrictions As the Largest Barrier to Adopting e-Support," April 14, 2003

The Chinese IT services market is forecast to reach $4.9 billion in 2003, a 18.1 percent increase from 2002 revenue of $4.2 billion, according to Dataquest Inc., a unit of Gartner, Inc. IT services revenue in China is projected to reach $8.9 billion in 2006, a compound annual growth rate of 19.6 percent.

"'Many multi-nationals find themselves in the unenviable position of educating both the local users and the local service providers on the value of IT services,'" said Jacqueline Heng, senior forecasting analyst for Gartner Dataquest. "'However, all is not bleak. It is a long task ahead for certain industries while others, such as the telecom services industry have found pay-off from their investments. The other sector to watch is the financial services market.'"

Gartner Dataquest analysts said the IT services market in China faces some difficult challenges in the next few years. "'Many factors can inhibit growth in the industry, such as the country's bank debts, the economic difference between the coastal regions and the rest of the country, the lack of a sizable middle-class segment, and slow de-centralisation of the rural governing system,'" Heng said.

Source: "Gartner Dataquest Forecasts IT Services Industry in China to Grow 18 Percent in 2003," February 25, 2003

Security is the most critical IT priority in the manufacturing vertical market in 2003, according to a survey by Dataquest Inc., a unit of Gartner, Inc.

"'Security is top-of-mind today because of a number of business, competitive and environmental factors. According to the survey results, manufacturers anticipate the government to issue regulations that would require more stringent IT security. Whether or not this expectation will become a reality is still uncertain,'" said Geraldine Cruz, senior analyst for Gartner Dataquest's IT Services group. "'In addition to regulations, the threat of war could spur some manufacturers, such as aerospace and defense manufacturers and those with significant government contracts, to fortify the security of their IT systems.'"

"'On the business front, trading partners are increasingly demanding manufacturers to demonstrate the security of information systems before the partners share data and transactions,'" Cruz said. "'Manufacturers also have a personal interest in securing trade secrets, intellectual property and operational data that, if compromised, could undermine their competitive advantage in the industry.'"

Source: "Gartner Dataquest Says Security is Top IT Priority for Manufacturing Industry in 2003," February 18, 2003

The IT services industry is going through one of its most difficult years, and the forecast for 2003 looks to be only slightly better, according to Dataquest Inc., a unit of Gartner, Inc. Worldwide IT services revenue is on pace to reach $556.8 billion in 2002, a 2.8 percent increase from 2001 revenue of $541.9 billion. In 2003, worldwide revenue is projected to reach $591.4 billion, up 6.2 percent from 2002.

"'Outsourcing of both IT management and process management will continue to grow faster than consulting services and development and integration services,'" said Kathryn Hale, principal analyst for Gartner Dataquest's IT Services group. "'This faster growth will result from vendors selling outsourcing services that enable buyers to both reduce their costs and improve their IT infrastructure.'"

Source: "Gartner Dataquest Says IT Services Revenue to Grow 6 Percent in 2003," November 20, 2002

"The IT services industry will face significant consolidation within the next five years, but not necessarily from traditional mergers and acquisitions, according to Dataquest Inc., a unit of Gartner, Inc."

"As end-user organizations and services organizations look to leverage their business process and industry expertise, they will look to pursue new types of partnerships and joint ventures. According to Gartner Dataquest analysts, the Business Services Value Chain is one way to look at a new consortium of players on the competitive landscape. These new partnerships could result in consolidation and in new competitive lock-out strategies for specific industry solution areas."

"'If successful, these consortiums of partners could create competitive barriers, realize high client satisfaction and reach new levels of profitability that may feed more development funds into designing more innovative solutions,' said Jennifer Beck, group vice president and research fellow for Gartner Dataquest's IT Services program."

"Gartner Dataquest analysts say that with 42 percent of companies planning to consolidate their shortlists for IT service providers, vendors have a compelling reason to more closely align solution R&D, partnering and marketing to secure a place on the value chain. Today, 25 percent of the service revenue flows through other service providers, not directly to end-user customers."

Source: "Gartner Dataquest Says IT Services Industry to Face Consolidation With Formation of Business Services Value Chain," May 7, 2002

"U.S. IT external services spending grew 5 percent in 2001, and in 2002 the industry will show a slight improvement as it's projected to grow 8 percent, according to Dataquest Inc., a unit of Gartner, Inc."

"U.S. external services spending totaled $254 billion in 2001 and the market is forecast to reach $276 billion in 2002. By 2005, the industry is expected to surpass $395 billion. Gartner Dataquest analysts said financial services, manufacturing and government will continue to be the three largest vertical market opportunities."

"'Macroeconomic factors in 2001 impacted industries such as communications, manufacturing and transportation with significant industry revenue slowdowns, reduced capital expenditure and personnel layoffs,' said Robert Goodwin, vice president for Gartner Dataquest's Global Industries Practice. 'IT investment strategies for 2002 will shift to phased engagements to deal with centralized budgeting and closer IT spending scrutiny. Users will want to wring more value from effective integration of existing products, and an emphasis on delivering ROI to shareholders will continue.'"

Source: Press Release - "Gartner Dataquest Says U.S. External Services Market to Reach $276 Billion in 2002," January 15, 2002.