Gartner: IT services sector set for slowdown

Next year will be grim for the IT services sector as organisations pare down spending to essentials, but the situation will...

Next year will be grim for the IT services sector as organisations pare down spending to essentials, but the situation will improve in 2003, according to analyst firm Gartner Dataquest.

Spending on IT services rose in 2001, but Gartner predicts that it will dip next year before increasing again in 2003, as businesses grapple with the effects of the economic slowdown and the 11 September terrorist attacks in the US.

Gartner calculated that international revenue from IT services increased by 7.1% this year, to $554bn (£390bn). The analyst firm predicts that the figure will reach $865bn by 2005.

The US is the biggest services market, with revenues hitting $271bn in 2001. Western Europe will report the second largest share at $149bn, with Gartner predicting that it will hit $229bn in 2005.

"Following 2002, increased confidence in the economy and business will present vendors with an opportunity to drive renewed demand among end-users," said Kathryn Hale, a principal analyst at Gartner.

However, until the economy picks up, companies will rely on what Hale describes as "life-preserver" services, which include payment processing, applications and data centre outsourcing, product support services, and security and disaster recovery.

"If senior executives can reasonably predict how the economy and security situation will play out, they could make investment decisions to compete in any environment, and begin buying IT services again," Hale said.

She predicted the increased adoption of mobile applications, Web services and communication convergence, adding that Windows XP, increased demand for customer relationship management, supply chain management and e-commerce solutions would drive growth at the beginning of 2003.



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