Executive Summary
The UK computer services industry market was valued at £19bn in 2000 and is expected to grow to £20.43bn in 2001. In 2000, the market grew by just 7.1%, compared with growth of 14.5% in 1999 and 23.3% in 1998. In 2001, the market will again witness relatively slow growth, with revenue rising by just 7.8%.
The market consists of four main types of services: operational services, professional services, systems/solutions and maintenance/support. In recent years, ongoing contract work such as outsourcing has been the fastest-growing sector of the market and this has been especially true in the past 2 years as client companies have cut back on ad hoc, one-off projects. Consequently, operational services and total outsourcing (operational outsourcing, processing and applications management) have been the main growth sectors of the market.
Since 1999, there has been a major reversal in the industry's fortunes as market sales growth has slowed. The ending of Millennium-Bug-related work, economic slowdowns in the US, UK and major markets such as Germany, the bursting of the `dotcom' bubble and the decline in telecommunications have all helped to slow down demand in the market.
In the face of loss of demand, company profits and margins have come under pressure, leading to the decline of many new e-business-based operators and a greater focus on profitability within the industry. In response, companies have started to cut back on jobs and have put greater emphasis on cost control and operational efficiencies. This, in turn, is putting more pressure on companies to form partnerships with erstwhile rivals, for sales and marketing purposes rather than for strategic reasons, and to look for mergers and acquisitions.
Between 2001 and 2005, industry growth will be modest by the standards of the late 1990s. The major players in the market will be the best placed to exploit the future growth of the industry, as important clients seek to place their business in the hands of trusted names. Overall, the industry will continue to undergo a period of adjustment between 2001 and 2003, as companies seek to restore their profitability. Over this period, companies relying on ongoing contracts will perform better than those dependent on project-based, ad hoc contracts. The need to adjust to the new environment will result in increased pressure to consolidate in the industry, leading to major mergers and acquisitions.
|
If you are interested in further information about the full Keynote report, including price and how to buy, please complete the following form. You will be contacted by Keynote who will provide you with the information you require.
Denotes a required field.