Gartner: Market Growth Dismal

"SIs who focused on government business flourished in this environment," Michele Cantara, research vice president for Gartner's worldwide IT services group, was quoted as saying. "In contrast, growth declined for most SIs who focused on commercial enterprises, particularly those specializing in application-related services where offshore competition has deflated rates."

Through the year 2000, the growth rates were between 10 percent to 12 percent, fueled by the implementations of ERP systems and Y2K, according to Dennis Wayson, managing vice president at Gartner.

"We've had a decline in the growth rate, not in the absolute value of the market," Wayson told GovernmentVAR.

There is a positive forecast.

"We think that the growth rates will begin to turn around, and we're looking at a market that will grow over the next five years at a compound annual growth rate of 4.1 percent for development and systems integration, and the consulting market growing at 4.6 percent," Wayson says.

There are two or three areas of opportunity service providers, consultants and integrators should be aware of, Wayson advises.

"There is a resurgence in enterprise resource planning, customer relationship management and a lot of the midsize enterprises, or companies with 1,000 or less people, are starting to do more of ERP and CRM implementations. The midsize market is a good target for traditional service providers and a good market for consultants and integrators."

Systems integrators' revenue in the United States declined 1.9 percent to $85 billion in 2003, down from $87 billion in 2002, according to Gartner.

IBM still leads in the worldwide SI market in 2003, with 7.6 percent of the market (see table above). Meanwhile, Accenture remains in the No. 2 position, with 3.7 percent market share. Fujitsu and CSC held steady in their rankings, while EDS has said it will move away from a standalone SI business and will use its consulting and SI capabilities to front-end outsourcing.