Gartner: Worldwide IT Services Revenue Grew 6.2 Percent in 2003

Revenue of India-based vendors grew 29 percent to 1.4 percent of total market


"For example, revenues of IT service providers in Australia, Singapore and Indonesia grew in 2003 in U.S. dollar terms," said Twiggy Lo, forecasting analyst for Gartner's IT services research in Asia/Pacific, based in Hong Kong. "But, when viewed in local currencies, revenues actually declined."

In China, the IT services market grew 6.8 percent, with revenue reaching $3.7 billion. The Chinese IT services industry experienced consolidation in the local market last year.

"Merger and acquisition activities by local service providers, such as Legend, Digital China, Neusoft and UF Soft, continued in 2003 as a quick way to build solution sets in end-to-end services," said Jacqueline Heng, principal analyst for Gartner's IT services research in Asia/Pacific, based in Singapore. "Global service providers are still educating the marketplace and, for some providers, this is starting to pay off. Enterprises in certain industries, such as telecommunications and finance, are becoming more sophisticated in their IT services demands."

The growth rate in Japan was 11.3 percent in 2003 but, as in other regions outside North America, much of the increase was currency related. In yen terms, revenue growth in Japan was 3.5 percent. "Although there were some signs of economic recovery toward the end of 2003, the full-fledged rebound of IT services did not occur last year," said Rika Narisawa, principal analyst for Gartner's IT services research, based in Tokyo.

On a worldwide basis, IT management services and process management services remained the IT services industry's best-performing segments in 2003, with growth rates of 10 percent and 9.3 percent, respectively. Gartner analysts attributed the relatively strong growth in these segments to the continuing appeal among companies buying IT services to control costs. Vendors offering consulting services had another tough year, growing only 0.1 percent, as customers continued to rule out large or technically difficult projects.

"Through 2004, outsourcing will continue to drive the growth in the worldwide IT services market, with IT management and process management growing faster than consulting services, and development and integration services," Hale said. "Outsourcing activity transfers IT spending from internal resources to external services. In addition, business process outsourcing (BPO) often transfers internal spending that was never in the IT budget to external providers. One example is human resources benefits.

"All of this creates market growth in IT services, while leaving the overall IT budget little changed in a period when we expect enterprises will continue to maintain tight controls on IT spending," she said.

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