IT consultants face tough year ahead

Link: Corporate IT spending set to fall

Spending on consulting, systems integration and outsourcing is weaker than expected, according to research company IDC, which has been forced to downgrade its market growth predictions.

IDC downgraded its predictions for growth in the worldwide IT services industry as businesses have spent less than expected on services.

‘The 2002 discrepancy is primarily the result of two market assumptions built into our forecast that did not hold true,’ says Ned May, program manager of IDC’s Worldwide Services research.

‘First, IDC expected enterprise spending in the first half of 2002 to be stable. However, spending on many IT services actually declined during this period. Second, the anticipated pick-up in demand by the middle of 2002 is now not expected until the last quarter of 2002, and a full recovery is not expected until the spring of 2003.’

IDC said it had originally predicted a 10.6% growth rate for IT services, with spending in the first half of this year remaining stable.

But as spending on IT services actually declined in the first six months of 2002, IDC has reduced this prediction to 6.7% – a 3.9% reduction in growth for the year.

The company said all geographic regions were hit by the downturn, but worst affected is the US and Canada. Least impacted by the downturn were Japan, Eastern Europe and Africa.

Project-oriented IT services such as systems integration, IS consulting, and custom application development were worst hit, and IDC said it had reduced its 2002 growth rates by nearly five percentage points.

IDC’s forecast growth rates for all outsourced IT services – ranging from outsourcing to application service providers – were also lowered in this midyear update. But forecast growth for these markets remains a healthy 14.5% for 2002, the research company said.