From the Analysts: IT services keep hope alive

Lion's share of work is done by smaller players

The software business may be consolidating into a few gigantic companies, but at least there’s still robust competition on the services side of things. That’s my conclusion from reading some new Gartner stats recapping the worldwide IT services market as of the end of 2005.

For starters, worldwide IT services revenue grew 6% in 2005 to US$624 billion (NZ$1.02 trillion). More interestingly, guess what chunk of that was spoken for by the top six companies (Accenture, CSC, EDS, Fujitsu, HP and IBM)? A measly 21%. Which means that US$493 billion worth of services work was performed by “others”, according to the Gartner survey.

Interestingly, it was also the first year since 2000 that outsourcing services grew more slowly than project-based services and software support — a possible sign that outsourcing is slowing.

I’m happy about these new stats because the biggest push right now for IT services companies is to “productise” their offerings (that is, enable them via technology platforms and make them more repeatable and less labour intensive). So it’s great for enterprise customers that thousands of companies, rather than just a handful, are creating these products and competing for the business.

It also makes perfect sense that the long tail would dominate IT services. Boutique system integrators, consultants and VARs should thrive in a world where creativity and talent are scarce resources and robust development tools are widely and cheaply available. IT services is about leveraging people and technology to deliver end-user value. It’s a big world with an amazing variety of problems to be solved. Charles Darwin and Adam Smith would be proud.

Some other worthy stats from the Gartner study: the combined growth rate of IT services vendors based in India was 27.5% (compared with the 6% average). Healthcare industry spending on IT services grew almost 9% — faster than any other industry vertical. And whereas IT services grew faster in the Asia-Pacific region than any other (12.7%, with Latin America the runner up at 10.8%), Japan lagged behind for some reason, buying only 2% more IT services.

Things that make me go BOINC while procrastinating instead of writing this column: I often daydream and think about the big life questions — who are we? How did we get here? And of course ... Who Let The Dogs Out? (who who who!)

I’m a little less stratospheric, however, when it comes to donating my machine’s spare MIPS (million instructions per second) — I have no interest in space-oriented projects such as SETI@home or Einstein@home. But biomedical and climate-change efforts? Yeah, I can sign up my machines for that. Recently I came across a cool-sounding project called BOINC, or Berkeley Open Infrastructure for Network Computing, which features a software client that lets anyone with spare machine cycles contribute to several down-to-earth scientific research projects that need lots of computing power.

Projects such as protein “folding” or sequencing, which promise to some day help cure Alzheimer’s and Huntington’s diseases. Climate scenario modelling is also highly computer intensive, and there are several interesting collaborative efforts in this area. All these projects could use more computing power. Buddy, can you spare some cycles?

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