Gartner: IT services market declined in 2002

The IT services industry suffered its first year-over-year revenue drop in 2002, according to research firm Gartner, as cost-conscious customers avoided expensive projects, and a growth in offshore services pushed prices down.

Global end-user spending on IT services totaled US$536.3 billion in 2002, a 0.6 percent decline from 2001's $539.6 billion total, Stamford, Connecticut-based Gartner said in a summary of a new report.

Asia/Pacific and Japan were the only regions to show growth in the IT services market last year, although even there, the global slowdown means growth is occurring more slowly than expected, Gartner said. Latin America was the region hit hardest, resulting in a 7.2 percent year-over-year negative growth rate.

IBM Corp. remains the top vendor worldwide, with 2002 revenue of $40.1 billion and a 7.5 percent share. Electronic Data Systems Corp. came in a distant second, with 2002 revenue of $21.1 billion and a 3.9 percent share.

Hewlett-Packard Co.'s acquisition of Compaq Computer Corp. boosted it several places to number four worldwide, behind Fujitsu Ltd. But HP's market-share leap came despite negative growth in the combined services revenue of the two companies, Gartner noted.

Managed services such as outsourcing showed the highest growth rate in 2002, with organizations turning to outside vendors to minimize and manage costs on tighter budgets, according to Gartner.

Project-based services like consulting and development performed the worst, as buyers avoided large and complex initiatives, the research firm said. It also reported that competition from workforces in regions outside the U.S. pushed down pricing for routine work, lowering the industry's revenue total for the year.

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