Gartner: IT services market to be worth US$865 billion by 2005

IT development and integration will be the largest sector and the leading driver of IT services spending over the next four years, constituting almost one-third of overall IT services spending, according to Dataquest Inc., a unit of Gartner Inc.

Spending is expected to grow by less than 10 per cent next year, as the world recovers from the global economic recession, amid the impact of heightened terrorism, Gartner said. But double-digit growth is expected from 2003 onwards. IT services revenues are expected to climb significantly after 2002, reaching US$865 billion in 2005, said the report.

Spending on IT services has been sluggish of late due to the shaken confidence of end users and the slow adoption of new technological innovations. The industry has been experimenting with new business models rather than exploiting new technology, Gartner said.

Currently, most enterprises are avoiding risk and delaying investment due to the declining economy and global political uncertainty, although “life preserver” services, such as payment processing, application and data centre outsourcing, product support services and security/disaster recovery continue to be areas which are relied on heavily, the report said.

While IT development and integration is the major segment where enterprises will put their money, companies will also be willing to spend on outsourcing their non-core business processes, as they attempt to reduce the cost of transaction processing, said the report.

Consulting services will be hardest hit and are expected to lag broader economic recovery by three quarters, said Gartner. But Windows XP, the demand for customer relationship management (CRM), supply chain management, e-commerce applications and the adoption of Web services software will drive growth in the beginning of 2003, the report said.

North America will continue as the biggest global spender on IT services with revenues expected to reach $423 billion by 2005, almost half of overall IT services revenue worldwide, said the analyst report. Western Europe is second place with revenue expected to surpass $229 billion in 2005, followed by Japan’s $86 billion, the report said. Asia-Pacific will be the fastest-growing region with revenues almost doubling from $31 billion in 2001 to $60 billion by 2005, the report said.

Gartner, in Stamford, Conn., can be reached at