IDC Reports On IT Services in Europe

July 28, 2000

NEWS BRIEFS

San Diego, CA — The Western European services market is undergoing a rapid change. The industry is witnessing increased merger and acquisition activity as service firms attempt to scale in size and to expand their competencies. IDC expects the market to continue to undergo this change over the next five years as the market continues to formalize its services offerings, customer base, and partnerships, and forecasts the overall market will increase from 10% to 12%.

“Market growth is occurring as a result of various factors including the deeper impact of ebusiness on services opportunities and the release of IT budgets for projects not related to Y2K or euro compliance,” said Nelly Sam, analyst for IDC’s European Services Overview program. From an overall value of $106 billion in 1999, IDC forecasts a 2004 market size of over $184 billion, representing a compound annual growth rate of over 12% for the forecast period.

To keep up with the pace of technology, the services industry is moving toward a more complex and value-added set of services. In this background of solutions integration, including ebusiness and CRM, but also the now more traditional ERP solutions, the systems integration competitive services category is now the largest segment of the services market and is evolving with a CAGR of 14% over the next five years.

Countries forecast by IDC to display growth above the European average of 12% include most Scandinavian countries and other countries such as France and Italy. Below-average growth is expected in Central Europe – Austria, Switzerland, and Germany. The highest spending on services in Western Europe remains in the banking sector, which IDC estimates spent $17.9 billion on external services in 1999, and will still be the highest spender in 2004. The next largest sector, which will also keep its lead through 2004, is discrete manufacturing, which IDC estimates to have spent $14.7 billion.

In the past couple of years, IT services became a real marketing tool for technology companies. Now the advent of solutions is taking over pure service delivery marketing and places emphasis on the solving of a business problem. IDC has identified several trends that we believe will occur in the next five years including an increase in outsourcing deals due to technology change, evolving services business models, increased alliances and partnerships, and increased speed of delivery.

European IT Services Market Forecast and Analysis, 1999-2004 (IDC Q09G) reviews the performance of the Western European information technology services industry and projects a forecast of corporate and government spending through 2004. The forecast examines Western European services spending by 12 competitive service categories, 17 vertical market sectors, and 16 countries. Major trends and key drivers and inhibitors for Western European services are discussed. Visit http://www.idc.com for more information.

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