Gartner Says 2002 Was the Most Difficult Year on Record for Worldwide IT Services Industry
Announcement posted by Gartner 15 May 2003
Report Provides Preliminary Market Share Results for Leading Vendors
The IT services market suffered through a difficult year as end-user spending on IT services totaled $536 billion in 2002, a 0.6 percent decline from 2001 results, according to preliminary results from Gartner Inc. (NYSE: IT and ITB). Gartner analysts said 2002 was the first year the industry suffered a decline in revenue, as market consolidation impacted the large and small players.
"Project-based services, consulting and development and integration, performed the worst, while managed services, such as outsourcing and process management, enjoyed the highest growth rate," said Kathryn Hale, principal analyst for Gartner's worldwide IT services group. "Many organizations are still seeing outsourcing as the best way to minimize costs in an economy of prolonged uncertainty in which very tight budgets are the norm. Project-based services suffered because users avoided large or technologically challenging projects, and because of price pressure on commodity-like work, which was further driven by growth in offshore services."
With its acquisition of PwC Consulting, IBM maintained its No. 1 ranking with 7.5 percent of worldwide IT services revenue in 2002 (see Table 1). Although IBM increased its revenue in 2002, the poor performance of PwC Consulting in 2002 impacted its growth rate. Hewlett-Packard was a new entrant into the top 5 vendors in 2002, as the company's revenue roughly doubled when it merged with Compaq. Although HP's rank rose in 2002, the combined services revenue of both companies suffered during this transition year resulting in a negative growth rate.
Asia/Pacific and Japan were the only regions to show growth in IT services in 2002. However, politically and economically, 2002 was a trying transitional time for multinational and local service providers in Asia. "Much of Asia is dependent on the global economy and its attracting developed markets' investments," said Hale. "Although, overall, the region had a growth rate of three percent, 2002 ended with every market impacted by the global slowdown and performing much lower than expected."
All other regions experienced a decline in the IT services market during 2002, with the worst hit being Latin America. Gartner analysts said political and economic instability in Latin America, particularly Brazil and Argentina, combined with buyer uncertainty fueled by weakness in the U.S. economy produced a 7.2 percent negative growth rate.
IT services revenue in North America declined 1.1 percent, while Eastern Europe and Western Europe saw revenue slip 2.6 and 0.1 percent, respectively.
Additional information is available in the Gartner Dataquest report "IT Services Market Suffers First Worldwide Decline." This report examines the current state of the worldwide IT services market. It looks at what trends are developing and how the top-tier vendors are performing. The report includes market share results for the top 20 vendors, worldwide. This report can be purchased on Gartner's Web site at www.gartner.com/DisplayDocument?id=394075&ref=g_search.
Gartner will provide analysis on the outsourcing industry at Gartner Outsourcing Summit 2003, to be held June 23-25 at the Century Plaza Hotel and Spa in Los Angeles, California. The Gartner Outsourcing Summit is the most comprehensive conference ever organized for users of outsourcing services, providing a 360 view of today's most important outsourcing issues, including offshore outsourcing, business process outsourcing, cost containment, buying smart, and optimizing deals through the Gartner Strategic Sourcing Life Cycle.
For more details or to register for Gartner Outsourcing Summit 2003, visit www.gartner.com/us/itsourcing or call 1-800-778-1997. Members of the media can register for the event by contacting Christy Pettey at christy.pettey@gartner.com or at 408-468-8312. Solution providers interested in sponsoring the Summit should contact Steven Miller at 203-316-3962.
About Gartner
Gartner, Inc. is a research and advisory firm that helps more than 10,000 clients leverage technology to achieve business success. Gartners businesses consist of Research, Consulting, Measurement, Events and Executive Programs. Founded in 1979, Gartner is headquartered in Stamford, Connecticut and has over 3800 associates, including approximately 1,000 research analysts and consultants, in more than 75 locations worldwide. Fiscal 2002 revenue totaled $888 million. For more information, visit www.gartner.com.
"Project-based services, consulting and development and integration, performed the worst, while managed services, such as outsourcing and process management, enjoyed the highest growth rate," said Kathryn Hale, principal analyst for Gartner's worldwide IT services group. "Many organizations are still seeing outsourcing as the best way to minimize costs in an economy of prolonged uncertainty in which very tight budgets are the norm. Project-based services suffered because users avoided large or technologically challenging projects, and because of price pressure on commodity-like work, which was further driven by growth in offshore services."
With its acquisition of PwC Consulting, IBM maintained its No. 1 ranking with 7.5 percent of worldwide IT services revenue in 2002 (see Table 1). Although IBM increased its revenue in 2002, the poor performance of PwC Consulting in 2002 impacted its growth rate. Hewlett-Packard was a new entrant into the top 5 vendors in 2002, as the company's revenue roughly doubled when it merged with Compaq. Although HP's rank rose in 2002, the combined services revenue of both companies suffered during this transition year resulting in a negative growth rate.
Asia/Pacific and Japan were the only regions to show growth in IT services in 2002. However, politically and economically, 2002 was a trying transitional time for multinational and local service providers in Asia. "Much of Asia is dependent on the global economy and its attracting developed markets' investments," said Hale. "Although, overall, the region had a growth rate of three percent, 2002 ended with every market impacted by the global slowdown and performing much lower than expected."
All other regions experienced a decline in the IT services market during 2002, with the worst hit being Latin America. Gartner analysts said political and economic instability in Latin America, particularly Brazil and Argentina, combined with buyer uncertainty fueled by weakness in the U.S. economy produced a 7.2 percent negative growth rate.
IT services revenue in North America declined 1.1 percent, while Eastern Europe and Western Europe saw revenue slip 2.6 and 0.1 percent, respectively.
Additional information is available in the Gartner Dataquest report "IT Services Market Suffers First Worldwide Decline." This report examines the current state of the worldwide IT services market. It looks at what trends are developing and how the top-tier vendors are performing. The report includes market share results for the top 20 vendors, worldwide. This report can be purchased on Gartner's Web site at www.gartner.com/DisplayDocument?id=394075&ref=g_search.
Gartner will provide analysis on the outsourcing industry at Gartner Outsourcing Summit 2003, to be held June 23-25 at the Century Plaza Hotel and Spa in Los Angeles, California. The Gartner Outsourcing Summit is the most comprehensive conference ever organized for users of outsourcing services, providing a 360 view of today's most important outsourcing issues, including offshore outsourcing, business process outsourcing, cost containment, buying smart, and optimizing deals through the Gartner Strategic Sourcing Life Cycle.
For more details or to register for Gartner Outsourcing Summit 2003, visit www.gartner.com/us/itsourcing or call 1-800-778-1997. Members of the media can register for the event by contacting Christy Pettey at christy.pettey@gartner.com or at 408-468-8312. Solution providers interested in sponsoring the Summit should contact Steven Miller at 203-316-3962.
About Gartner
Gartner, Inc. is a research and advisory firm that helps more than 10,000 clients leverage technology to achieve business success. Gartners businesses consist of Research, Consulting, Measurement, Events and Executive Programs. Founded in 1979, Gartner is headquartered in Stamford, Connecticut and has over 3800 associates, including approximately 1,000 research analysts and consultants, in more than 75 locations worldwide. Fiscal 2002 revenue totaled $888 million. For more information, visit www.gartner.com.