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Thursday, April 2, 2015

Evolving IT Services Market Warrants Attention

The global IT services market may be worth $1 Trillion, but it is highly fragmented. The top three players – IBM, HP, Accenture – account for 12.5% global market share. Other top players – like CAP Gemini, Computer Sciences Corp., Cognizant – account for around 1% share each.

The bulk of the market is shared by hundreds of smaller companies that do low margin but regular work like Business Process Outsourcing, software maintenance, data centre operations, application hosting. Most Indian companies get their bread and butter from such ‘outsourced’ work.

Some of the larger outfits – like TCS, Infosys, HCL Tech – have moved up the value chain through higher margin but more discretionary systems integration projects. But they are well behind the big boys in the top end, high margin consulting business.

In a recent article, Andrew Lange of Morningstar has provided an overview of the current global IT services market and its prospects. Those already invested in the sector, and particularly those planning an investment in some of the smaller Indian players, may find the article useful.

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