Solution Services Uptick Ahead

Supply chain to lead pack as markets resume growth by 2004, IDC predicts

Framingham, MA — Despite short-term challenges, slight growth is set to resume in the worldwide and U.S. solution services markets in the next two years, and supply chain is set to lead the way, according to a new report from technology research firm IDC.

In the report, "Worldwide and U.S. Solutions Services Forecast, 2003-2007," IDC wrote that solutions services markets have been hampered by the economic slowdown, upheaval in the competitive landscape, tight information technology (IT) budgets for external services and overall buyer frustration.

Nonetheless, after experiencing a decline in 2002, all worldwide and U.S. solution services markets, except for e-commerce services, are expected to rebound in late 2003 and 2004, IDC believes.

IDC forecasted that the supply chain management (SCM) services market would represent the largest opportunity, reaching $40.5 billion in 2007 and surpassing enterprise resource management (ERM) services in market size by 2005.

Customer relationship management (CRM) services will remain ahead of e-commerce services, representing the third-largest opportunity through the forecast period with a compound annual growth rate (CAGR) of 8.5 percent.

Lastly, content management (CM) services, knowledge management (KM) services and globalization and localization (G&L) services will represent the fastest-growing but smallest market opportunities, growing at 12.8 percent, 16.8 percent and 13.9 percent, respectively, over the forecast period.

"IDC believes that uncertainty surrounding the war in Iraq and the economy will continue to hamper spending," said Stephanie Torto, program manager for systems integration services at IDC. "However, given the diversity of services required in the solution services markets, the industry should weather the storm in 2003 fairly well and experience slight growth, particularly in outsourcing services."

Elsewhere in the study, IDC reported that customer services, information security and supply chain are among the top priority areas in which customers should invest. Also, optimization of existing technologies and systems will continue to drive the market as a result of the large IT investments made during the 1990s (especially in lieu of a "hot" new technology).

The researchers advise that services firms must continue to be client focused and present holistic solutions that address customers' business needs.