AMR Research Releases Key Findings on the State of Global IT Services Market

Troubled Economy Opens Up Unprecedented Opportunity for Second-Tier Firms

BOSTON - Oct. 17, 2002 - AMR Research today released a study entitled "Global IT Services Firms in Transition: They've Changed - Should You?" which details the current landscape of the global IT services industry and emerging trends in the space. The report provides recommendations for companies currently evaluating or renegotiating contracts, as well as profiles of the top firms, including a review of vertical and functional capabilities, organizational change, corporate strategy, and financial viability.

According to the report, recent accounting scandals, layoffs, initial public offerings, rebranding, and acquisitions have necessitated the expansion in services at global consulting and IT services firms in an effort to weather today's tough economy, while providing a foundation for a quick response when the recovery does come. However, an expanding service footprint has resulted in commoditized offerings and narrower technology choices, a subsequent loss of cachet for global firms, and unprecedented opportunity for second-tier players.

"We have seen rates fall as much as 50 percent for many services," said Dana Stiffler, senior analyst at AMR Research and author of the report. "With competition at a fever pitch, firms would rather negotiate a lower rate to keep clients active than risk having them go dormant or losing them. But common sense should always win out. Unreasonable pressure on IT services partners puts relationships - and therefore projects - at risk."

Key Findings

• Applications management and outsourcing now account for the most significant, or only, growth in the service portfolios of global systems integrators (SIs). The emphasis now is on repeatable, scaleable transactions, not relationships.
• Global SIs are increasingly facing stiff competition from second-tier firms. Users cite strong vertical expertise and sustained involvement of senior executives in projects as key differentiators.
• Enterprise software vendors want - and are getting - a bigger slice of the dwindling services market. With software sales down or flat, vendors are shoring up their top line with their own services, rather than relying on partnerships to fulfill this need.

About AMR Research

AMR Research is a strategic advisory firm that provides critical analysis and actionable advice to business and technology executives to help them manage resources, assess and mitigate risk, and increase business value. The company's research initiatives are based on The Performance-Driven Enterprise, a practical approach to understanding how business strategy drives technology adoption. AMR Research, founded in 1986, is headquartered in Boston, MA. More information is available at www.amrresearch.com.