Report: IT Services Market Strong In 2004

Increasing demand for business-process-outsourcing services and application-integration work, along with rising government spending, should add up to a strong year for a number of IT services providers, according to a report released Friday by SoundView Technology Group.

SoundView analyst John Jones notes that bookings in the fourth quarter of 2003 totaled $19.5 billion, compared with $16.6 billion a year earlier. He expects that growth to continue through the new year. A spending survey by SoundView "points to growth for all types of services," Jones says in his report.

The good news for IT buyers is that, despite increasing demand, Jones foresees no pricing increases by large service providers such as Accenture and IBM Global Services. However, he notes that prices for offshore services are on the rise as Indian service providers capitalize on the boom in offshore outsourcing.

Based on his optimistic outlook, Jones raised his share-price targets on two major service providers--upping Affiliated Computer Services from $65 to $70 and Accenture from $28 to $32. He notes that Accenture's sales of business-process-outsourcing services grew 84% year over year in 2003 and that 70% of ACS's revenue is derived from the high-margin BPO market.