Internet Services Spending to Surge

Revenues in the worldwide Internet services market grew an impressive 71 percent in 1998 to reach $7.8 billion, according to a report by International Data Corp. (IDC).

IDC’s “Worldwide Internet Services Market and Trends Forecast, 1998-2003” also reports revenue in the Internet services market will grow at a compound annual growth rate of nearly 60 percent and pass $78 billion by 2003.

“In addition to becoming more prominent, Internet projects are becoming more sophisticated and complex, demanding different skills of programmers, designers, and business strategists. Because companies are having extreme difficulties locating and hiring employees with these skills, they are turning to outside service providers to fulfill their needs,” said Meredith McCarty, a senior analyst with IDC. “In addition, corporations are under increasing pressure to execute projects faster and with greater reliability, which is also causing them to turn to outside providers.”

Not surprisingly, IDC found that the US leads the way when it comes to spending on Internet services. In 1998, the US accounted for more than half of the worldwide spending on Internet services by shelling out more than $4.6 billion, according to IDC. The next two years should also be critical to the US market, with more e-commerce systems and back-end integration predicted, overall spending should increase, the report says.

Western Europe is the second-largest market for Internet services in the world. IDC predicts it will maintain a five-year compound annual growth rate of 67.1 percent.

IDC’s report also ranks the largest Internet service firms by their 1998 revenues.

“Although large, traditional IT service firms currently dominate the list, the Internet services market does offer a relatively even playing field, allowing for some of the new breed of Internet service firms to capture market share,” McCarty said. “In more traditional, established markets issues such as brand, reputation, and years of experience play an important role in the purchasing decision. However, this is not the case in today’s Internet services market. Instead, issues such as flexibility and creativity are important.”