Research company IDC has released a report that indicates the systems integration (SI) services market will start to recover in the second half of 2003, and will grow by 6% next year.
The study, entitled Worldwide and US Systems Integration Services Forecast and Analysis 2003-2007, predicted that the worldwide SI market will increase from about $65.5bn (£41.1bn) in 2002 to $82.8bn (£52bn) in 2007.
"Our expectation is that between 2003 and 2007 there will be a positive growth rate of 2.3% per year," he said. "So there is some expectation for growth going forward, but the growth rate we have now is a lot lower than what we had the previous forecast last year," said Jim Westcott, senior research analyst at IDC Canada.
"A lot of these project-based services categories [including SI services] are tied to not only discretionary spending, but profitability, and because profitability has been under intense pressure for the last couple of years companies don’t have a lot of money that they can throw at big integration projects," he explained.
Customers are apprehensive about making large IT investments without fully understanding return on investment (ROI), and not enough "hot" technology exists to drive growth in this sluggish market.
IDC also said systems integrators are actively exploring new ways to cut costs from delivery models in order to sustain profitability. This includes using alternative delivery centres, offering flexible pricing structures and building offshore capabilities.
Building offshore capabilities will become a requirement in the near term, which reflects how the SI business model is transforming fundamentally, with integration services work continuing to be in demand but becoming buried in larger outsourcing deals.
Westcott said that Canada is benefiting from this offshore trend as US companies start to sign outsourcing agreements with Canadian providers.