Published: April 20, 2004
Courtesy of TechWeb News

The world's top 30 services companies recorded strong revenue growth overall in 2003, due in large part by more customers looking to outsource work that's unrelated to their core business, a market research firm said Tuesday. Revenues increased by 10.9 percent over 2002 to reach an aggregate $209.2 billion, International Data Corp. said. Outsourcing revenues grew the fastest at 17.9 percent, while project-oriented services, such as systems integration, custom application development and consulting, increased by only 7.2 percent.
"Generally speaking, when economic times are uncertain, outsourcing picks up because companies want to focus on their core competencies," IDC analyst Alexander Motsenigos said. "Outsourcing has been fairly strong over the last couple of years, and the trend is continuing."

Also contributing to the revenue growth were acquisitions many major vendors had made over the last couple of years, Motsenigos said. For example, IBM had bought PwC Consulting, BearingPoint picked up pieces of Anderson Consulting, and Computer Sciences Corp. acquired DynCorp.

In addition, companies reporting revenues in the Japanese yen or European euro benefited from both currencies' appreciation over the U.S. dollar last year, Motsenigos said. The Euro appreciated 19 percent to 20 percent over the dollar, and the yen 7 percent to 8 percent. IDC converts all revenues to the dollar.

"It had a significant impact," Motsenigos said of the dollar's depreciation.

Nevertheless, the value of contracts signed in 2003 increased by 19 percent to $145 billion, the first year-to-year jump in bookings since 2000, IDC said. The growth was largely due to the shift in the market from project-oriented services to long-term outsourcing contracts. The latter, in general, generate far more revenue, often hundreds of millions of dollars over several years.

The top six vendors last year in revenue were IBM, EDS, Fujitsu, Hewlett-Packard, Accenture and CSC. Collectively, the companies collected $114 billion in revenue.

"Outsourcing has become the dominant driver of growth for all those companies," Motsenigos said.

The services companies that recorded the most revenue growth out of the 30 vendors were Northrop Grumman, 76 percent; CGI Group, 44 percent; Dell Services, 28 percent; Deutsche Telekom's T-Systems business, 25 percent; and EMC Services, 21 percent.

In 2003, companies worldwide spent $382 billion on information technology products and services, an increase of 8.8 percent over 2002, according to IDC. Those numbers exclude business-process outsourcing.