Gartner’s Dataquest cuts IT services market forecast

Market researcher Dataquest Inc., a unit of Gartner Group Inc., cut its projections Wednesday for the value of the worldwide IT services market.

In 2004 the market is expected to reach U$1.2 trillion, instead of the $1.3 trillion forecast for 2004 by Dataquest last year. For 2005 Dataquest forecasts the global IT services market to reach $1.4 trillion.

“There has been a slowdown in the market. Growth rates have slumped. In previous years we saw annual growth rates between 17 per cent and 20 per cent in some markets, suddenly it has dropped,” said Robert De Souza, analyst for Dataquest’s IT services Europe group.

In 2000 the worldwide IT services market reached $666 billion, up a mere 9.7 per cent from 1999, Dataquest said. This year the market is expected to grow 12.5 per cent.

“The market has not grown as much as we previously thought it would. This year growth will be slow. We expect the market to pick up in 2002, but we will not get to the 20 per cent growth rate,” said De Souza.

After a couple of ups and downs in the IT services spending curve companies are now waiting to see what will come next, according to De Souza.

“We saw significant spending in IT services around Y2K. After that many companies weren’t sure whether they needed to spend. Then electronic business came around and spending went up. That collapsed as well. Now that the U.S. economy is in a dip companies are waiting,” said De Souza.

North America accounts for the 52 per cent of the worldwide IT services market, with revenue of $345 billion in 2000. In 2005, the U.S. market will still be the largest with $712 billion, according to Dataquest. IT services providers also feed off organizations that are restructuring, De Souza indicated.

“In time of recession companies still use IT services to optimize their business and save money,” said De Souza.

Western Europe was the second largest IT services market in 2000 with revenue of $172.8 billion, which Dataquest forecasts will grow to $326 billion in 2005.

The Asia/Pacific IT services market is expected by Dataquest to be the fastest growing region, from $37.7 billion in 2000 to $124.8 billion in 2005. Growth will be fueled by the increase in government-funded IT projects in many countries, according to Dataquest.

Dataquest, a unit of Gartner Group Inc., in San Jose, Calif., can be reached at