Global IT services revenue increases by eight per cent

But Gartner figures show a difficult last four months in 2008, as recession grips spending

IT services grows more than eight per cent in 2008

Global spending on IT services grew 8.2 per cent from $745bn (£463bn) in 2007 to $806bn (£501bn) last year, according to analyst Gartner.

But much of that growth came in the first six to eight months of the year, before the effects of the recession hit vendors.

"[IT service providers had] four months encountering the beginning of the global economic downturn, featuring widespread cost restrictions and cost reductions,” said Gartner worldwide IT services research vice president Kathryn Hale.

The only two market segments that undershot forecasts were IT management and process management, which was surprising, said Hale.

"In economic hard times the potential cost savings from outsourcing usually keeps this market segment buoyant. However, apparently buyer hesitation to commit to the long-term requirements of outsourcing agreements took precedence in 2008,“ she said.

IBM continued as the biggest IT services firm, with 7.3 per cent of the market, and although HP moved into second, courtesy of its acquisition of EDS, the difficulties of integrating that business meant revenue grew well below the overall industry rate at 1.9 per cent.

Indian vendors were hit early on in the downturn, reflected by their growth of 12.9 per cent in 2008, down from the 39.8 per cent figure achieved in 2007.

Gartner said this was to be expected since offshore providers sell especially heavily to the financial sector, and typically lead with offshore application development services, which are relatively easy to delay in tough times.

One area that showed above-average growth was carrier networks, achieving 14.2 per cent growth.

"As carriers look to create operational efficiency and business growth and continue network transformation projects, opportunities are created for professional services firms, particularly in network and system integration and managed services,” said Gartner research director Christine Tenneson.

She added that carriers were looking to transform their infrastructures to create opportunities to develop new services, while looking to cut costs by using standard IP networks.