Outsourcing Revenue Growth Slows: Gartner

Worldwide services revenue rose 6% from 2004, and for the first time in five years the demand for software support outstripped overall outsourcing growth.

Antone Gonsalves, Contributor

June 13, 2006

1 Min Read

For the first time in five years, revenue from software support and project-based services grew in 2005 at a greater rate than the overall average for the global IT services market, a market research firm said Tuesday.

Worldwide services revenue totaled $624.4 billion last year, a 6 percent increase from $588.9 billion in 2004, Gartner Inc. said.

"Traditionally, the outsourcing service segment has been the key growth area for the worldwide IT services market, but that trend was altered in 2005," Gartner analyst Kathryn Hale said in a statement. "In 2005, project-based services and software support grew at a greater rate than the overall market average, which has not been the case since 2000."

IBM continued to lead the pack last year, but its growth rate was less than half the average at 2.5 percent. The only vendors in the top six to beat the market average were Accenture and CSC, which grew their revenues by 13.1 percent and 6.1 percent, respectively. The top six vendors and their market share were IBM, 7.6 percent; EDS, 3.2 percent; Fujitsu, 2.8 percent; Hewlett-Packard and Accenture, 2.6 percent apiece; and CSC, 2.3 percent.

Among industries, healthcare organizations had the highest increase in spending on external IT services, rising 8.7 percent to $19.4 billion from $17.9 billion in 2004. Financial services, however, continued to spend the most, buying $141.3 billion in services, a 7 percent increase from the previous year.

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