IDC Foresees Further Consolidation in the European Services Market

MADRID – August 11, 2009 – According to a recent study published by IDC, the 50 largest service providers in Western Europe represented around 55.5% of the overall services market in 2008, compared with 53.4% in 2007. IDC estimates that the Western European services market grew by 8.5% in current dollars during 2008 (5.3% in constant currency), driven by healthy growth in the IT services market and double-digit growth in the BPO market. The top 50 service vendors grew 9.7%, 1.2 percentage points above the total services market, for a combined revenue of $152.2 billion.

The 2008 rankings painted a largely positive picture of the services sector, with most of the vendors enjoying growth driven by renewed spending on project-based as well as outsourcing services. We expect the next edition of the top 50 ranking to show a less positive picture as a result of the intensification of the downturn.

Market consolidation continued throughout 2008 and will continue in 2009. The HP-EDS merger was the major contributor to the market consolidation trend, although for 2009 some other large reorganizations – the combination of Fujitsu Services and Fujitsu Siemens Computers (FSC) under one brand and the Oracle-Sun merger – will also contribute to reduce the market fragmentation.

The Italian company Gruppo Engineering, together with Steria and Wipro, were the three fastest-growing companies in 2008. Most of the growth among the fastest-growing companies can be attributed to acquisitions in 2008 or in previous years. However, this trend mostly refers to local and regional players in Europe, whereas India-based players stand out for their high organic growth.

The study, Top 50 Western European Service Players in 2008 (IDC #Q03R9, August 2009), provides a competitive analysis of the high end of the Western European IT and business services industry. It presents an overview of the competitive landscape for services companies, examines trends and changes in the marketplace, and helps provide a quantifiable view of European IT and business service providers.

"With a few exceptions, most of the vendors in the top 50 ranking enjoyed growth driven by increased sales, combined with small acquisitions to strengthen their presence in specific geographies or industries, or to gain global sourcing capabilities," said Laura Converso, research manager, European Services Market and Competitive Insights. "Pure-play offshore vendors continue to quickly penetrate the European services market. TCS is the first so-called offshore provider to reach the top 20 IT services ranking, marking a symbolic breakthrough."

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