Business slows in IT services market
But report by Gartner finds managed services growing
The managed services market is growing, but consulting and integration are in decline, according to a report by Gartner.
The research found that 2003 saw the value of the IT services market decline by 4.8 per cent.
"This isn't great news for the market," said Dean Blackmore, analyst at Gartner's IT services research in Europe. "The managed services market is where the growth will be. The worrying areas we looked at are consulting and system integration. They aren't just showing no growth, they are actually declining."
Blackmore advised the channel to pick contracts wisely and make sure margins are protected when taking on new business.
In previous years when business was slow, some companies took on business with little or no margin, a practice that is now unsustainable, he said.
The survey found that the biggest outsourcers of services were the US and India. Vendors in the UK and other European countries were supporting local markets and expanding slowly.
IBM dominates the in-house services sector, with its closest rival EDS making barely half of IBM's revenue. The fastest growing vendors are Fujitsu, Hitachi and Northrop Grumman.
But channel players seemed confident about services. Just this month two UK storage VARs, Source Consulting and Sagitta, were bought by US giant Glasshouse to form the world's largest storage consultancy company.
Phil Cavanagh, IT manager at reseller Computeraid, said: "In the UK we've actually seen a slight growth in consultancy, but managed services are really taking off. As for contracts, there's a more realistic view in the market as a whole. People are being more thoughtful about what they take on."
Adam Austin, director of marketing at corporate VAR Computacenter, also took a positive view.
"The services side of the business at Computacenter is very healthy at the moment. Managed services are growing particularly fast, and we've been successful in that area. Other growth areas come from managing Microsoft products," he said.