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IBM Top Outsourcer, But Indian Rivals Gaining

Modest revenue growth and market share slippage shown by Western outsourcers stand in marked contrast to Indian firms.
IBM remained the top technology services vendor in 2006, but the company suffered the biggest decline in market share among U.S. outsourcers, according to new research from Gartner.

IBM last year pulled in $48.2 billion in worldwide IT services revenue, a 1.8% gain over the previous year. However, its market share slipped from 7.5% in 2005 to 7.2% in 2006, according to Gartner, which released the numbers on Wednesday.

The No. 2 U.S. outsourcer in terms of revenue and market share last year was Electronic Data Systems. The company posted tech services sales of $21.3 billion -- up 7.6% year over year--and held market share of 3.2%, compared to 3.1% in 2005.

The No. 3 player, Accenture (which is technically based in Bermuda), saw revenue climb 7.8% to $17.2 billion and market share increase slightly from 2.5% to 2.6%.

Hewlett-Packard and Computer Sciences Corp. were, respectively, the fourth and fifth largest U.S. tech services providers in 2006, according to Gartner. HP posted $16.4 billion in sales of IT services and held 2.4% of the market -- down from 2.5%. CSC recorded sales of $14.7 billion with 2.2% market share, down from 2.3% in 2005.

The modest revenue growth and market share slippage shown by Western outsourcers stand in marked contrast to Indian firms, whose access to cheap offshore labor allows them to provide a range of advanced IT services at low cost.

Virtually all of the larger Indian outsourcers, including Infosys Technologies, Tata Consultancy Services, and Wipro Technologies, have consistently posted revenue gains in the mid-double digits in recent quarters.

In an effort to keep pace, most U.S. tech services vendors are ramping up their own operations in India.

Gartner didn't provide sales and market share numbers for offshore companies.

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