System integrators and professional services firms are in a declining market that could wipe out pure-play companies, a new report has predicted. advertisement
System integrators and professional services firms are in a declining market that could wipe out pure-play companies, a new report has predicted.
A US report by industry analyst META Group"s Stan Lepeak has suggested that system integration has struck a major inflection point that could eventually kill off most companies reliant on either consulting or outsourcing.
The report said that the market had passed its boom phase and was entering its bust. It argued that pure-play system integrators and consultancies were suffering declining revenues, exacerbated by high numbers of demanding buyers and relatively low-cost offshore competition.
For example, BearingPoint had recently lost 25 percent of its market capitalisation in one day after missing its quarterly revenue and earnings estimate. Yet business process outsourcing and selective sourcing were growing, according to the report.
The process was not cyclical but marked a continuing decline, driven by many factors including IT services price deflation, globalisation, a more competitive market, standardisation, chronic oversupply and increased regulation, it said.