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 $536.3 billion in 2002, a 0.6% decline from 2001’s $539.6 billion total, 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% year-over-year drop.

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

HP’s acquisition of Compaq boosted it several places to number four worldwide, behind Fujitsu. But HP’s market-share leap came despite a drop 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.