IT Consulting Services Hit a Growth Spurt

IT consulting is growing worldwide, says IT consulting and advisory group IDC.

According to an IDC study released April 17, IT consulting spending is expected to increase at a compound annual growth rate of 5.2 percent worldwide between 2006 and 2010, with the Europe, Middle East, and Africa regions surpassing the Americas in spending by 2009.

“By 2008, the Americas and EMEA spending will be about the same, and then slowly, EMEA spending will outpace Americas. This is pretty predictable considering the Americas market is the most mature. Its hard to maintain the same level of growth indefinitely,” Bo Di Muccio, program manager for IDC, told eWEEK.

IT consulting spending in the Americas in 2005 was $10,322 million, and is predicted to have a 4.6 CAGR until 2010. Worldwide, the CAGR is expected to grow 5.2 percent in the same period.

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The study, a forecast of areas of strong growth in IT consulting over the next five years, cited stabilization in pricing as a key trend shaping this marketplace growth.

“Billing rates have declined significantly since 2000 to 2001. From 2001 to 2004 there was almost a 35 percent decline in blended rates, from the low $300s to the low $200s hourly,” said Di Muccio, in Framingham, Mass.

“What we see, and this is one of the reasons we look at it as healthy and in growth mode, is that the pricing decline has stabilized. Its still going down a little, but not on the drastic decline [as] in previous years.”

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Buyers are showing less sensitivity to price and more willingness to spend money on consultants when the need is strong.

“Where enterprises feel pain, and where that pain needs to be removed immediately, is where these consulting firms get the highest billable rates,” Di Muccio said.

The continued bundling of IT consulting with outsourcing has yielded one of the strongest areas of growth, as specialized outsourcing advisory firms crop up to help companies make good outsourcing decisions.

“If you boil it up, outsourcing is all about enterprise cost reduction play. Its not about whether, but how: Thats where these outsourcing advisory firms come in. A company has to understand a lot about political, environmental and exchange rate risk in the countries where they might outsource. A lot of know-how goes into this.”

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