Global IT services plumbs 8-year low

Contract value for IT services drops 40 percent in second quarter results representing eight-year low but Asia-Pacific decline "less dramatic", new report notes.

The global IT services market saw contract value fall 40 percent in the second quarter of 2011 year-on-year--representing a low not seen since 2003--due to the lack of large-scale government projects to offset lackluster returns from enterprise customers, Ovum reported.

Released Monday, the report said total contract value for this year's second quarter came up to US$19 billion, which marks a 40 percent decline from the same time last year and the lowest quarterly figure for more than eight years.

Additionally, the number of deals worldwide has gone downhill for the fourth consecutive quarter and had dropped 20 percent to 384 deals year-on-year, the report noted.

Explaining the continuing downward spiral, Ed Thomas, an Ovum analyst, said in the report that public sector spending on outsourcing would usually offset "lackluster returns from enterprise clients".

"However, on this occasion, government spending on IT services projects also took a hit, with a notable lack of large-scale projects on offer," he said.

Ovum pointed out that there were no mega deals--those valued at US$1 billion or more--signed in the second quarter this year. In previous quarter, the majority of large deals were awarded by public sector bodies but even this took a hit this quarter, it stated.

That said, the Asia-Pacific region experienced a "less dramatic" downturn, according to the report. The region raked in US$1.7 billion in total contract value, down only 4 percent compared to the same period in 2010, it noted.

Private sector spend was not the reason for the slight decline, though, as the Asia-Pacific region contributed only 15 percent of global IT services contract value. Ovum attributed this to the lack of large deals from the region's enterprises.

The research firm did express optimism the region will rebound from its second quarter showing. It had earlier forecasted that Asia-Pacific's IT services spend will grow at a compound annual growth rate (CAGR) of 6.6 percent over the next four years to hit US$205 billion by 2015.

In a separate report, IBM was identified by another research company IDC as the top IT services vendor in the Southeast Asia region for 2010. Big Blue reportedly raked in 31 percent more revenue than its competitors last year, IDC noted.


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