HARDWARE IS A COMMODITY: SERVICES WILL SEPARATE THE LEADERS FROM THE PLAYERS IN THE IT INDUSTRY.

While hardware has become a commodity, what differentiates IT companies is the added value they can provide through services. This trend is not going to stop any time soon. As International Data Corp. (IDC) observes, because of the migration of technology talents from non-IT companies into the IT industry as well as the economies of scale crated by the one-to- many models applied by IT services providers, it will be more economical for companies to call on external IT services providers instead of fighting to keep there is departments staffed and savvy about the new technologies. As a result of this evolution, IDC expects the worldwide IT services industry to increase at a compound annual growth rate (CAGR) of 10 percent by 2003 to reach nearly $472 billion.

Currently, IDC rates IBM Global Services as the number-one IT services provider in the world in terms of revenues, followed by EDS, Fujitsu, Andersen Consulting, and Computer Sciences. However, IDC warns the door to the top spots in the market is wide open.

"The scope of the services provided by IT services companies has been evolving. From services around products to system-related services and business process services, it is more difficult to identify IT services offerings that do not involve solving a business problem," says Sophie Mayo, manager for IDC's Worldwide Services research. "As a result of this change, the big names in the IT industry are no longer seen as the experts. Similar to the revolutionary era of the PC, the smaller, fast- growing entrepreneurial companies with specific expertise are meeting the demand for a new kind of packaged offering."

Of the current top 10 services providers, IDC suggests that IBM Global Services, EDS, Fujitsu, and CSC will maintain their positions but won't hedge bets on the remaining leaders in today's market.

The threat of eroding market share won't come from only traditional IT players. When customers look for a logistics solution, for example, they might direct their attention to Ryder Integrated Logistics or UPS, which have not been on IT services providers' traditional radar screen.

In its new report, Who Will Lead the Global IT Services Industry in 2000? A Competitive Analysis (IDC #B21223), IDC analyzes the competition in the worldwide IT services industry. The report discusses competitive trends, staffing concerns, marketing and branding strategies, partnerships and alliances, and IT solutions for specific areas. It ranks the top 25 service providers by revenues and ranks the top five service providers by IDC's competitive service categories. Additionally, the report profiles 10 leading service providers (IBM Global Services, EDS, Fujitsu Group, Andersen Consulting, Computer Sciences Corp., Hewlett-Packard, Compaq Services, Oracle, Unisys, and PricewaterhouseCoopers). To order a copy of the report contact Sally Donovan at 1-800-343-4952, ext. 4219 or at [e-mail].