IDC predicts IT services market rebound

The IT services market will recover this year from a weak 2001, as companies holding back due to the economy’s slowdown begin dipping again into their wallets in the second half of 2002, IDC said Wednesday.

“The recovery’s main driver would be the pent-up demand within enterprises for critical IT services,” said Ned May, IDC’s Worldwide Services program manager. “Spending has been brought almost to a standstill, and critical IT needs must be addressed (with IT services).”

IDC expects clients to call upon IT service providers to help them get the most out of their IT infrastructure, May said.

“A lot of money was spent in previous years on software and hardware. Now companies have those assets but haven’t gotten the full value out of them,” May said.

Clients will also tap IT service providers for assistance in integrating portable computing devices into their IT architecture, as companies realize the benefits of arming employees with these mobile devices, May said.

The IT services market, which grew 6.5 per cent to $349 billion in 2001, will post a 10 per cent revenue growth in 2002, according to May.

That estimate is much more optimistic that the 2.8 per cent revenue growth expected for 2002 by Gartner Inc.’s Dataquest Inc. unit, which issued its prediction for the worldwide IT services market last week. However, as measured by Dataquest, the market is much bigger in terms of dollars: an estimated $557 billion in 2002.

The growth expected by IDC assumes that the economy will shake off its funk and accelerate in the second half of the year, May said.

IDC predicts that between 2001 and 2006, the market’s revenue will grow at a compound annual rate of 12.4 per cent. Revenue in 2006 is expected to come in at about $626 billion, according to IDC. Dataquest, on the other hand, predicts that the market will surpass that dollar figure in 2004. But Dataquest forecasts slower annual growth rates of between seven per cent and eight per cent for the coming years.

IDC splits up the IT services market into the following segments:

— IS consulting

— system integration

— custom application development

— outsourcing

— hardware and software deployment and support

— IT education and training

IDC recently revised its definition of the market, removing from it a segment called “processing services,” which included things like payroll processing and check processing, and expanding the scope of the outsourcing segment, May said.