Understanding Today's Demand For IT Services

The IT services market is behaving peculiarly in this tech downturn. While project-based IT consulting and systems integration work is now falling, it: 1) held up remarkably well until Q4 2008; 2) is down less than other categories of IT spending; and 3) has good prospects for a solid recovery in 2010. Many industry commentators were expecting outsourcing revenue to pick up and help close some of the gap created by the drop in project work, as happened in the 2001 to 2003 tech downturn. But this expectation has not been realized. In fact, in Q4 2008 and Q1 2009 outsourcing revenues for the major providers were down more than their project revenues. While some pick up in IT outsourcing deals and revenues is likely, secular trends point to slow growth in IT outsourcing even when the tech recovery occurs. This means that outsourcers will need to enter new markets and ruthlessly focus on profitability to survive.