Jack Noble, managing director of core services at the European operation of Fujitsu Services the world’s third largest player believes that only IBM Global Services, EDS, Accenture and, unsurprisingly, Fujitsu, will survive the shake-out.
He said: The number of players in the market will diminish. Services companies have to be international, and they have to have cash in the bank in order to be able to fund large outsourcing contracts. You wonder about companies that do not fit this profile.
IBM Global Services currently ranks as the largest player in the global IT services market. However, it could theoretically buy its four closest rivals and still not hold a monopoly position.
M&A activity in the services sector has accelerated this year, with LogicaCMG moving for French second-tier player Unilog, and Atos Origin reported to be in merger talks with Deutsche Telekom’s T-Systems operation.
At the same time, Mr Noble also recognizes a trend away from client organizations outsourcing their entire IT infrastructure to a single vendor, and instead looking to work with a number of specialist suppliers.
He said: The days when clients hand it all over to one supplier are gone. Companies see that model as a risk, should a sole supplier fail to deliver. The trend is to have two or more suppliers.
Mr Noble believes that many clients have become battle-hardened from past experiences with services vendors. He said: IT services has suffered as an industry because it has over-promised and under-delivered. IT is seen by many organizations as a necessary evil, that will probably fail at some stage.
Although he describes JP Morgan’s decision last year to reverse its decision to outsource its IT infrastructure to IBM Global Services as a one-off, Noble warns: There will be more in-sourcing if we can’t put this industry right.
