Moderate Growth Projected for the U.S. IT Services Market Over the Next 18-24 Months, IDC Research Reveals
FRAMINGHAM, MA – DECEMBER 17, 2002 – While market growth will return to higher levels by 2004, a new report published by IDC forecasts only a moderate growth rate of 6.3% for the U.S. IT Services market in 2003. The market will continue to be inhibited by lower-than-expected business profits, a trend toward smaller integration contracts, and slowed growth of new packaged software licenses. However, IDC expects the U.S. IT Services market will grow at a CAGR of 8.4% over the next four years.
"It has been a very difficult year in the U.S. IT Services industry," said Michael Melenovsky, senior vice president, Worldwide Services and Vertical Markets for IDC. "Not only was the U.S. economy in recession and corporate spending constrained, but further price pressures were brought to the industry by the increased use of offshore — primarily Indian — resources. In addition, IT services firms found themselves faced with the need to demonstrate quantifiable value in every new deal that is signed. This has lengthened the sales cycle at a time when investments were increasingly put on hold."
IDC identified the following key short-term trends affecting the U.S.
IT Services market:
Sales cycles continue to lengthen
Buyers continue to focus on optimizing prior IT investments rather than initiating new projects
Project-oriented services continue to face pricing pressure as demand remains down and low cost offshore alternatives increasingly gain momentum
The forecasts presented in this study represent IDC's newest estimates and projections for 2002-2006 based on the following:
IDC's Operation Beacon III updated forecast scenario effort conducted in the fall of 2002 as a result of the continued general economic slowdown
Reported and observed trends and events in 2002 as of mid-October 2002 and their predicted impact on the U.S. IT Services market for the five-year period ending in 2006
Additional modeling to estimate the remainder of 2002 using a market-level approach
"There is too much uncertainty regarding both a possible war with Iraq and the U.S. corporate profit outlook for IDC to definitively state IT services market growth for 2003. As a result, we are providing both a probable and worst case scenario that are dependent on the outcome of these uncertainties," said Ned May, program manager for Worldwide Services at IDC.
This IDC study, U.S. IT Services 4Q02 Forecast, 2001-2006: Probable and Downside Scenarios (IDC #28445) presents a fourth-quarter update to the five- year forecast for the U.S. market for IT services. The purpose of this document is to identify and quantify the impact of recent trends and events influencing the U.S. IT services market opportunity through the third quarter of 2002 and their impact on the five-year forecast. Particular attention is paid to the near-term years: 2002, 2003, and 2004.
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