Worldwide IT services revenue totalled $763-billion in 2009, a 5.3% decline from 2008 revenue of $805-billion, according to Gartner.
"2009 was a year like no other before it for IT services providers," says Kathryn Hale, research vice-president for Gartner's worldwide IT services group. "Their priorities changed and their business focus rushed from aggressive sales or tactical revenue acquisition, to strategies designed to simply maintain revenue levels, keep a handle on costs and manage profitability."
Each of the five largest IT services providers in 2009 declined in revenue, with HP and Accenture reporting the largest declines at 10.4% and 11.8%, respectively. The top 20 vendors as a group gained ground slightly over their smaller competitors in 2009, with the group accounting for 37.5% of the market, up marginally from 37.3% in 2008.
While global sourcing makes the location of a provider's headquarters increasingly less relevant, Gartner tracks this information for more than 300 vendors, which collectively account for more than 70% of end-user spending worldwide.
India-based vendors grew only 3.6% in terms of US dollars in 2009, down from 15.4% growth in 2008. India-based vendors were impacted early in the economic downturn. This would be expected, as these providers sell especially heavily to the financial sector and typically lead with offshore application development services, which are relatively easy to delay in tough times.
The economic uncertainties and the crisis in industries have had negative implications on the worldwide consulting market in 2009, and many providers' revenue growth rates were negatively impacted. However, business outcome-focused providers of consulting services with established business relationships were often successful in growing their market share better than the market average.
Suppliers with a broad range of advisory services were attractive to buyers (for example, if they could provide assistance on how to migrate financial risks of an underperforming complex business operation). Some providers were also able to capitalise from already recovering economies by selectively co-investing with buyers for innovative and growth-focused projects as a source to increase their consulting services market share.
"2010 will be a year of focused readjustment for IT services providers," says Hale. "The discipline exercised in 2009 leaves the industry profitable and relatively nimble. But investors will expect to see revenue growth and managing those expectations, while maintaining margins will be more challenging than the comparatively unambiguous goals of 2009, a year in which expectations were modest."