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To: Elwood P. Dowd who wrote (456)	5/17/2002 1:38:14 PM
From: Elwood P. Dowd	Read Replies (2) \| Respond to of 4345

Rabid competition shrinks IT services prices By Juan Carlos Perez May 16, 2002 3:05 pm PT update WITH COMPETITION IN the IT services market at its most aggressive point ever, providers are facing unprecedented pressure to lower prices, a double-edged sword for clients, according to Gartner's Dataquest unit. When choosing an IT services provider, clients must consider other factors in addition to price. Providers that offer the lowest prices sometimes compromise on quality and fail to meet the clients' expectations, according to Dataquest. IT service providers, on the other hand, must adapt to the reality that the norm for annual revenue growth in this market going forward will be under 10 percent, Dataquest said in a statement Wednesday. For example, the IT services market is expected to grow merely 2.8 percent in 2002 compared with 2001, reaching $557 billion. Revenue growth should improve to about 7 percent in 2003 over 2002. But years with double-digit revenue growth will be the exception rather than the rule in the future, Dataquest said. The growth the IT services industry will experience in coming years will be fueled primarily by companies' interest in using the Internet to achieve more "connnectedness," Dataquest said. Dataquest, in San Jose, California, predicts the following annual revenue for the IT services market: -- 2003: $597 billion, or 7.2 percent over 2002 -- 2004: $644 billion, or 7.9 percent over 2003 -- 2005: $696 billion, or 8 percent over 2004 The tepid growth forecasted for 2002 can be blamed not only to pricing pressure from increased competition, but also on reduced IT spending, as companies cope with the economy's current slowdown, Dataquest said in a separate statement issued Thursday. The cut in spending this year is hurting all segments of the IT services market, which Dataquest breaks down into seven segments for its research purposes: -- development and integration -- management services -- hardware maintenance and support -- business process and transaction management -- consulting -- software maintenance and support -- education and training Dataquest made the announcements at the Gartner IT Services and Sourcing Summit 2002 in Las Vegas, which ends Friday. Juan Carlos Perez is Latin American bureau chief for the IDG News Service, an InfoWorld affiliate.