A massive $149bn or 11.4% of total global IT spending now falls to the services sector, according to latest research from Phoenix, Arizona based Annex Research. Growth in the IT services sector was around 22% in 1998, which is expanding at least twice the pace of most other IT sectors, reports Bob Djurdjevic of Annex. IDC is similarly upbeat, saying that in the UK 35% of the total 1998 IT spend, a sum around 10bn pounds, was spent on computing services. By 2003 IDC predicts that this will rise to 18.5bn pounds or 39% of total UK IT spend.
In his annual briefing on market trends, European IT services watcher Richard Holway goes so far as to say that these are golden days. Unlike IDC and Annex Research, however, Holway expects annual growth rates in outsourcing, business processing and application management sectors to fall in the early years of the new millennia to around 12.5% by 2002 showing an overall worth of 8.5bn pounds.
Holway identifies the outsourcing market in the UK as the main engine of growth. Business process outsourcing or BPO, in particular, is the fastest moving sector of the UK outsourcing market with contracts worth 900m pounds being awarded in 1998. Holway also reckons that enhanced support services was a smaller but faster growing sector, with a 39% increase in 1998. Bespoke development ran a close second with a 38% rise in revenue on the year while application management showed a healthy 30% increase on the year. On the downside though the IT hardware maintenance sector contracted by 5% over the year.
IDC identifies five areas where it expects UK growth to be particularly high. These are packaged software support and integration, application development and maintenance, desktop outsourcing, network operations outsourcing and network consulting and integration. By 2003 IDC expects the packaged software support and integration market to be worth in excess of 2bn pounds, representing a CAGR of 23% in the five years to 2003. The application development and maintenance sector spurred by demand for Euro conversion services is estimated to be growing at a 19% CAGR clip and is predicted to be worth around 1.2bn pounds by 2003. Desktop outsourcing shows the strongest growth with a CAGR of 30% in the five years to 2003 and will be worth 1.1bn pounds by 2003. In the networks arena, operations outsourcing is thought to be growing at 26% CAGR while consulting and integration is expected to grow at 20% CAGR in the five years to 2003.
Holway meanwhile sees the internet related market as a being the potential leader in the coming years. In 1998 the sector reported revenue of 1.1bn pounds and Holway predicts that this will rise to 5bn pounds by 2002 representing 16% of the total UK SCS market.
