US IT services market takes a hit

Posted by A Staff Writer

Analyts at Ovum have officially ruled 2012 as bad for the IT services market.

Ed Thomas, Senior Analyst in the Ovum IT Services team said that 2012 was the worst for IT services contract activity since 2002.

He wrote that performance in the three months to the end of December 2012 fell well below the levels seen in the same period of 2011. This makes IT services contract activity the lowest than it has been for more than a decade.

In Ovum’s latest analysis, deals in the IT services market was only $20.8 billion, down 34 per cent on the same period of the previous year.

The number of deals fell 17 per cent in the same period and there was a notable lack of big deals. While the fourth quarter was slightly better than the beginning of the year, that really does not make things better across the year.

Thomas blamed the ongoing economic uncertainty afflicting key markets for IT services such as the US and Europe as a major factor behind the weak performance of the industry in 2012.

His research suggests that many enterprises remain wary of committing to major projects, with issues such as the Eurozone crisis having a particularly significant impact.

In addition, public sector activity has reduced as many governments come under pressure to cut public spending in the face of high debt levels, Thomas said.

Enterprises were just as bad, where the number of deals announced fell by 50 per cent. In healthcare contract volumes were down 39 percent and in the financial services market they fell 18 percent. The only industries in which contract activity was up on the previous year were telecommunications and technology sectors.

Europe was the leading market for private sector contract activity in 2012 but the number of contracts generated by European enterprises actually declined sharply during the year, falling 31 percent to $16.7 billion.

Private sector contracts in America slumped dramatically in 2011, rebounded in 2012, finishing the year up 48 percent at $10.5 billion.

This was mostly boosted by a couple of big contracts from Procter & Gamble and it is too early to tell whether or not this represents a significant shift in approach by enterprises in the region, Thomas said.