labels: it news
Average IT services deal size shrinking, but Indian players gainnews
Our Convergence Bureau
28 November 2002

Mumbai: The average deal size in the services areas worldwide has been shrinking, from $ 88 million in 2000 to $ 58 million in 2002, says the International Data Corporation (IDC). An IDC press release said it's evident that pricing pressures are building up. This, coupled with fewer big contracts, has been giving the IT services industry a tough time in the first three quarters of 2002. This situation is expected to improve only marginally in 2003.

Although this is truer for the US, the situation in Europe has been similar. The number of deals worth less than $ 50 million have been constantly growing, up from 35 per cent in 2000 to 60 per cent in 2001, they have been largely smaller and tactical outsourcing projects. However, there has been a slight encouragement in the fact that the number of deals is double in the last quarter of 2001 as compared to the same quarter in 2000.

Outsourcing of IT operations has been growing faster than consulting and systems integration business. The market is expected to witness further consolidation in the consulting and SI market, with focus on strategic partnerships. Development of offshore capabilities by the top IT services players is going to be a key differentiating factor. It is here that Indian services players have immense opportunities.

According to Mike Melenovsky, senior vice-president, IDC US, "Indian services firms should be proud of the influence and respect they have achieved in shaping the worldwide services industry. Almost 10 per cent of the incremental growth in services spending worldwide during 2001 was with Indian firms."

When asked what type of vendor relationship best describes their preferred future buying philosophy regarding outsourcing, almost 50 per cent were in favor of a strategic relationship with the outsourcer based on mutual trust. A small 14 per cent also prefer to get into a joint venture relationship.

The key success factors for any services player will be broadly under two areas: their ability to gain share and degree of alignment with emerging opportunities.

Ability to gain share Opportunity Alignment
1. Price competitiveness (including off-shore capabilities) 1. Deep technology skills
2. Financial strength 2. Trusted partnerships
3. Cultural fit, ability to work with customer's employee 3. Breadth of portfolio, to include ITO and BPO
4. Ability to expand geographically 4. Vertical and Business Process expertise
5. Brand recognition  
6. Sales capabilities.  


 

 


 search domain-b
  go
 
Average IT services deal size shrinking, but Indian players gain