Last year was not a happy one for many in the IT services market, though outsourcers are likely to keep their heads above water.
Globally, end user spending in 2002 ($US536 billion) declined 0.6% from 2001, says Gartner, the first time the market had ever seen a fall in revenue. Project-based services such as consulting, development and integration had it toughest, though managed services like outsourcing and process management did best.
Gartner guesses that companies are using external IT as a result of cost minimisation in a time of uncertainty and tight budgets. Project-based work suffers because users have avoided big, tough projects and much commodity work, at least in places like the US, has gone offshore chasing the cheapest price.
IBM, with the help of recently acquired PwC Consulting, led the IT services firms. Its $US40 billion revenue and 7.5% market share were both nearly twice that of number two, EDS. HP was a new entrant at number five ($US12.2 billion). Asia-Pacific and Japan were the only regions to show growth in IT services in 2002, Asia reaching 3%. Much of that is due to China and India, says Gartner locally. However, Gartner says 2002 was a tough time for Asian service providers, as the region is so dependent on the global economy. IT services revenue declined 1.1% in North America, 0.1% in western Europe. Latin America slumped 7.2%.
Late last year IDC revised its five-year forecasts, but believes the chances for the IT services market "still remain bright" with an expected compound annual growth rate of 20.5% through to 2006.
Email Mark Broatch.