Driven by outsourcing, the services segment of the information technology market will grow faster than any other IT segment worldwide over the next five years, according to a Dataquest analyst who spoke here last week at Dataquest's Predicts '99 conference.
"The worldwide IT services industry will be growing faster than anything else over the next five years," said Roger Fulton, a Dataquest vice president and director. "Services and software are where the money is flying."
The rate of growth in Western European IT services will be strongest in the UK, Fulton said, followed by France and then Germany.
"Underlying it all is the outsourcing trend," Fulton explained, adding that 65 per cent of all IT service contracts in Europe concern outsourcing agreements. "By 2002, some 80 per cent of enterprises will use IT outsourcing as a routing means to increase competitiveness or gain new resources and skills in Europe."
Some of the biggest European vendors who compete for business in the IT services market here include Siemens AG, Cap Gemini Group, ICL, Sema Group PLC, Groupe Bull SA, Alcatel SA, Origin BV, the Italian group Finsiel, and British Telecommunications PLC, Fulton said.
While large US services companies such as IBM can offer IT buyers the convenience of one-stop shopping, smaller services companies can gain an edge if they offer quality specialisation services and set up a strong presence in local markets, Fulton said. "Specialisation and localisation will win," he said.
While IT services companies based in Japan are considered to be seven to eight years behind those based in Europe in terms of global services, this could change, Fulton said.