Sunday, 12 August 2007

Ownership of the UK SITS sector

When Phil Codling and his team at Ovum publish this year's Market Trends this month, it will be the 20th edition of what used to be called the 'Holway Report'. Comparison of the rankings of UK SITS players between that first Holway Report in 1988 and the the latest one may, on first sight, look very different. But in fact the companies are pretty much the same - only the names, order and ownership have changed! EDS was, of course, Systems Designers back then (they hadn't even made it to SD-Scicon). Capgemini was still Hoskyns. I could go on.

I was very interested in reading Phil Codling's observations on the latest (2006) rankings. In particular the changes in 'country' ownership with the UK holding its own but the US declining. Of course, we expected significant growth from the Indians. But I suspect the real winner both this year - and next - is 'surprisingly' the French. Phil notes the advance of Capgemini and, of course, Atos Origin is up there in the higher echelons too. Next year Xansa will be French owned after its purchase by Steria. And who knows who will own LogicaCMG next year?

I hope Ovum will not mind me reproducing Phil's note below. At least it's a plug for the 20th edition! It's the first edition where I have made no input and, I suspect, it will be the last with any reference to my name. Feel a bit sad really!

Ovum Hotnews
10 Aug 2007
10:55 Ovum's latest UK rankings highlight industry evolution
Phil Codling

This week we've been finalising our UK software and IT services industry rankings, ready for publication next week. There's good news for EDS, which takes back the no.1 spot thanks to a year of MoD-driven growth. The most striking recent success story in the upper echelons has to be Capgemini, which jumps to no.4 in the table this year. As recently as 2003, the French firm was on the verge of dropping out of our top 10 altogether. Its challenge now is to find another growth engine to replace its HMR&C mega-deal, which is beginning to mature and generate less growth for the business. EDS faces a similar issue: massive though they are, the DII engagements will not drive growth indefinitely.

Some of the most interesting analysis we've done on the latest ranking table involves changes in market share by country over time. It's become commonplace to bemoan the lack of home-grown presence in the software and IT services industry. However, UK-based players have managed to sustain their share of the revenues of the top 50 players (with their combined share falling just one percentage point over the past three years from 29% to 28%). Over the same 'post-boom-bust' period, UK representation in the top 50 has dipped slightly from 26 firms to 23, but it's the US that has really lost out. Its corporations have under-performed the UK market in the last three years and have consequently seen their share of top 50 revenue fall (from 54% to 47%). That's despite the acquisition-fuelled expansion of a number of major software firms, notably Oracle, and reflects just how hard it has been for the large global outsourcers to grow and adapt in a mature, multi-sourcing environment.

As for the growing nations, India not surprisingly stands out. Driven by sustained demand for offshoring capability and lower prices, the country has tripled its share of top 50 revenues since 2003 and now has four representatives (TCS, Wipro, Infosys and HCL) in our rankings. But for all the growth of such players, it's worth noting that their market share remains pretty low - at just 5% of the combined revenues of the top 50. Indeed, Japan with just one representative in rankings -Fujitsu - still claims a bigger slice of the top 50 than India!

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