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INDUSTRY TRENDS
Analysis of 1997 Results of Top Five Global IT Services Companies
IBM Widens Its Lead Andersen and CSC in Virtual Tie for No. 3; Cap Gemini's Grows Faster
IBM widened its revenue lead in 1997 over the No. 2 global IT services company, EDS, from a $1.5 billion to a $4.1 billion edge. IBM revenues went from $15.9 billion to $19.3 billion, while EDS' increased from $14.4 billion to $15.2 billion.
But the Big Blue will have a hard time maintaining such a revenue momentum in the future, considering that EDS had gained share over IBM in terms of new contract sales. In 1997, EDS nearly doubled its new contract signings - from $8.4 billion to $16.3 billion. IBM's new IT services sales slumped, on the other hand, from $27 billion in 1996 to $24 billion last year (see Annex Bulletin 98-13, 3/28/98). That's an $11 billion swing in EDS' favor.
Andersen Consulting and CSC, on the other hand, continued their neck-and-neck race in 1997 for the No. 3 position among the top IT services vendors. They finished the year in a virtual tie, with revenues of $6.6 billion each. Finally, the No. 5 global IT services firm, Cap Gemini Group (CGG), accelerated its growth in French Francs in 1997 from 31% to 36% (from FF 14.8 billion to FF 20.2 billion). But the strength of the U.S. dollar in the last 12 months reduced CGG's 1997 growth rate to 17% in U.S. dollars.
CGG's preliminary results also show a significant improvement in the company's profitability. Operating margins went from 7% in 1996 to 8% last year, while its net profit, adjusted for capital gains from the sale of its investment in debis Systemhaus (see Annex Bulletin 97-24, 6/05/97), was FF 562 million ($92 million), double the corresponding 1996 total.
Geographic Market Analysis
U.S. But while IBM has taken over the global leadership in IT services in 1995, it is still only the No. 2 vendor in the U.S. market, lagging behind EDS, the U.S. market leader, by more than $2 billion in revenues ($8.0 billion versus $10.1 billion).
CSC is the No. 3 in the U.S. with revenues of $4.4 billion, followed by Andersen which did about $3.4 billion-worth of business in the U.S. in 1997 (see Annex Bulletins 98-08, 2/19/98 and 98-13, 3/25/98).
Europe. The Big Blue is still the biggest IT services competitor in Europe with estimated 1997 revenues of $6.9 billion, nearly double that of the No. 2 EDS ($3.7 billion).
CGG is the No. 3 vendor on the Old Continent with estimated revenues of $2.7 billion. Andersen and CSC and fourth and fifth respectively with $2.3 billion and $1.8 billion European revenues.
Asia/Pacific. IBM is also tops in the Asia/Pacific market, with estimated IT services revenues of $2.9 billion. EDS is No.2 with revenues of just under $1 billion, while CSC, the No. 3, derives a little of $400 million from this market.
Happy bargain hunting!
Bob Djurdjevic
Charts:
- IBM Global Services '97 revenue shares (by business segment)
- World's top five IT services companies - global revenues and market shares
- Top five IT services companies in the U.S. - revenues and market shares
- Top five IT services companies in Europe - revenues and market shares
- Top five IT services companies in Asia/Pacific - revenues and market shares
- IBM non-U.S. Global Services revenues - by business segment
- IBM U.S. Global Services revenues - by business segment
- IBM European Global Services revenues - by business segment
- IBM Global Services/ISSC business trends (1991-1997)
- IBM Global Services/ISSC gross margins (1991-1997)
- IBM Global Services/ISSC employment by business segment
- IBM Global Services/ISSC sales productivity
Tables:
- IBM Global Services - Estimated Profit & Loss statements (1995-1997)
- IBM Global Services/ISSC - Estimated U.S. and international business and financial ratios (1995-1997)
