Globalization, Standardization, and Automation Drive Changes in the $663 Billion worldwide Services Industry,

IDC: Companies and governments will spend over $663 billion on external services worldwide in 2006, representing a moderate growth of 6.8% from 2005. IDC predicts that worldwide spending will increase at a five-year compound annual growth rate of 6.9% during 2006-2010, ultimately reaching more than $866 billion. Throughout this forecast period, IDC believes that globalization, standardization, and automation will re-shape the growing worldwide services industry, and vendors will need to adopt new strategies to succeed amid these changes.

Globalization, standardization, and automation will have profound impacts on the services industry. The most significant examples include the globalization of services delivery, the standardization phenomenon in the software industry, and new technologies that drive the automation of services in both the consumption and internal delivery processes.

Ooutsourcing, in particular business outsourcing and application management services, continue to fuel the worldwide services industry. In addition, the project-based services segment has experienced continued, moderate growth. Regionally, IDC projects that the Americas, particularly the United States, will continue to host the majority of the services opportunity throughout the forecast period. However, the fastest-growing regions are Central Europe, the Middle East, and Africa (CEMA), Asia/Pacific excluding Japan, and Latin America.

The impact of the globalization phenomenon on developing countries' economies (e.g., Brazil, Russia, India, China [BRIC]) is fueling opportunities for large global services players, but also emerging players with new business models.

IDC recommends the following actions for successful services players in the changing industry landscape:

• Focus on attracting and retaining talent, as talent management will increasingly become a key differentiator.

• Consider BRIC (Brazil, Russia, India, China) strategically and differently. In addition to matching capabilities with the specific requirements of these countries, large players should also apply the lessons learned to serve all clients in a broad and seamless portfolio.

• Master the art of componentization and assembly, as vendors are seriously considering SOA at the core of the services portfolio and even delivery platform.

• Help your clients outsource, multisource, and insource. While there exists a huge pool of organizations that will never outsource, vendors must introduce insourcing, and help them optimize internal shared services centers.

orldwide Services 2006-2010 Forecast

Publ 20060418