A new IDC study forecasts that the worldwide IT services market will increase to $489.8 billion at a 6.7 percent compound annual growth rate (CAGR) over the full five-year period ending in 2007. However, continued economic and geopolitical concerns will constrain spending in the short term. For 2003, IDC forecasts four percent growth — although much of this will occur in the second half of the year.

“The prolonged global economic slowdown has dramatically accelerated structural changes in the IT services marketplace,” said Ned May, program manager, Worldwide Services, IDC. “The end result is that many vendors must now scramble to remake and re-brand themselves to address the market’s shifting priorities.”

The IDC study, “Worldwide IT Services Forecast and Analysis, 2002-2007 (IDC #29066),” presents the worldwide IT services forecasts for 2003-2007. The document also examines the assumptions related to the forecasts and the market trends, and provides an overview of the major trends in each geographic region. Lastly, the document makes recommendations for services firms competing in the IT services market. Key findings of the study are:

• The global market continues to be plagued by depressed economies and sluggish business profits across the Americas, Western Europe, and Japan.

• Outsourcing of all types is becoming the dominant engine of industry growth as companies continue to hand off an increasing portion of IT responsibility to external providers.

• Growth across all IT services segments is driven more by a shift in corporate budgets from internal to external spending than by any increase in aggregate spending on IT.

• Customers are unwilling to make large IT investments without clearly understanding and defining return on investment (ROI).

• There is a lack of compelling new technologies driving growth, and most IT services remain focused on either optimizing prior investments or reducing costs in operating current IT environments.

In the Middle East, a similar IDC study, “The IT Services Market in the UAE and Saudi Arabia,” predicts a relatively stronger growth in IT services spending during the next five years. Values of these IT services markets are expected to exceed $300 million and $1 billion by 2006, in the UAE and Saudi Arabia, respectively.

“Changing business attitudes among local end-users combined with increasing investments in complex hardware and software technologies will continue to drive spending on IT services in the regional market,” commented Torben Pedersen, senior analyst, IDC Middle East & North Africa. “Our most recent data shows that Middle East IT services markets are outpacing worldwide IT services market increases with compound annual growth rates (CAGR) reaching 11.0 percent and 10.2 percent in the UAE and Saudi Arabia, respectively, over the next five years.”

Arab News Compunet 22 April 2003