IDC: Global SI services market still growing

IDC: Global SI services market still growing

While the double-digit growth seen in the systems integration (SI) services market is a thing of the past, IDC ireleased a report indicating this market would start to recover in the second half of 2003, and would grow 6% in 2004

While the double-digit growth seen in the systems integration (SI) services market is a thing of the past, IDC in Framingham, Mass., released a report indicating this market will start to recover in the second half of 2003, and will grow six percent in 2004. The study, entitled Worldwide and U.S. Systems Integration Services Forecast and Analysis 2003 -- 2007, forecasts that the worldwide SI market will increase from about US$65.5 billion in 2002 to US$82.8 billion in 2007 -- a compound annual growth rate (CAGR) of 4.8 percent.

However, Jim Westcott, senior research analyst at IDC Canada Ltd. in Toronto said Canada’s piece of this pie is forecast to amount to about $2.8 billion in 2003.

"Our expectation is that between 2003 and 2007 there will be a positive growth rate of 2.3 percent per year," he said. "So there is some expectation for growth going forward, but the growth rate we have now is a lot lower than what we had the previous forecast last year."

Westcott said economic conditions in Canada are not conducive to market growth.

"A lot of these project-based services categories (including SI services) are tied to not only discretionary spending, but profitability, and because profitability has been under intense pressure for the last couple of years companies don’t have a lot of money that they can throw at big integration projects," he explained.

IDC says customers are apprehensive about making large IT investments without fully understanding return on investment (ROI), and not enough "hot" technology exists to drive growth in this sluggish market. In addition, IDC says systems integrators are actively exploring new ways to cut costs from delivery models in order to sustain profitability. This includes using alternative delivery centers, offering flexible pricing structures and building offshore capabilities.

In fact, IDC says building offshore capabilities will become a requirement in the near term, which reflects how the SI business model is transforming fundamentally, with integration services work continuing to be in demand but becoming buried in larger outsourcing deals.

However, Westcott said this is less true for Canadian companies.

"The primary market for offshore services is the United States," he explained. "The Canadian [outsourcing] market is actually doing quite well in Canada, even through the last couple of years. But it’s been primarily with Canadian-based providers or international providers that are present in the Canadian market."

In fact, he said Canada is benefiting from this offshoring trend as American companies start to sign outsourcing agreements with Canadian providers.

"Canada is sort of that near-shore alternative to the pure offshore," he said.--

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