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Defense, Japanese firms see services revenue surge

A report from Gartner shows IBM in first place in worldwide IT services in 2003, with HP slipping one notch to fifth place.

Worldwide spending on information technology services grew 6.4 percent to $570 billion last year, with defense-oriented companies and Japan-based providers notching market share gains.

In a study published earlier this month, market researcher Gartner said IT spending rose from $536 billion in 2002. Gartner found that Northrop Grumman, Lockheed Martin, Fujitsu and Hitachi grew faster than the overall market. IBM remained the frontrunner with 7.5 percent market share, followed by Electronic Data Systems with 3.7 percent, Fujitsu with 2.8 percent, Computer Sciences Corp. with 2.2 percent and Hewlett-Packard with 2.2 percent.

A separate study this month from research firm IDC said IBM held the top market share position last year in information systems outsourcing, which refers to companies farming out tasks such as data center operations. EDS, CSC, Fujitsu and Atos Origin filled out the top five, according to IDC.

IT services, which range from hardware maintenance contracts to application development to full-fledged outsourcing of technology operations, are an important category for big technology companies including IBM. Services revenue make up nearly 50 percent of IBM's total revenue.

IDC's study suggested that India-based IT companies are poised a grab a larger share of the outsourcing market. "Offshore players such as Wipro and HCL Technologies are increasingly winning infrastructure management contracts that IDC expects will begin to penetrate into larger outsourcing deals," IDC said.

In its report, IDC counted only revenue from broad IS outsourcing engagements, not revenue from discrete application outsourcing, discrete network and desktop outsourcing engagements or discrete managed Web-hosting services.

Hewlett-Packard has been touting an expanded services division, but its IT services market share position slipped from fourth place to fifth place from 2002 to 2003, according to Gartner.

HP spokesman Ryan Donovan said the company has experienced strong growth this year. In its last quarter, ended July 31, the company's services division posted 12 percent growth in revenue year over year to $3.5 billion. Its managed services--or outsourcing--growth was 42 percent, the company said.

"The market has changed dramatically," Donovan said.