IDC states that 2002 was the third consecutive year in which Israel's
IT services market shrank. IDC predicts that the market will expand
by a modest 2.7% over the next five years to $1.386 billion in 2007.
IDC revised its forecast from late 2002, which predicted only a 2.7%
drop in Israel's IT services market in 2002, compared with a year
earlier. IDC attributed the difference the worse than expected
recession in 2002.
IDC claims that without the large-scale government intervention and
projects initiated by the Ministry of Finance Accountant General,
Israel's IT services market would have collapsed. Under the
circumstances, the government sector determines the size of the
market, the pricing of services, and in many cases the preferred
software application as well.
The government is the largest consumer of IT services, accounting for
25.4% of all projects, amounting to $308.52 million, in 2002. IDC
also notes that the manufacturing market grew by 27.8% in 2002.
IDC states that IBM (NYSE:IBM) was the largest company in Israel's IT
services market in 2002, with $164 million in revenue. It was
followed by Ness Technologies and Matrix IT (TASE:MTRX), although the
differences between the top three companies was small.
Together with fourth and fifth ranked Hewlett-Packard (NYSE:HPQ) and
Electronic Data Systems (NYSE:EDS), the top five companies accounted
for 46.5% of the market. IDC adds that following the wave of
take-overs and acquisitions in the past year, the ten largest
companies in Israel's IT services market now account for 60.8% of the
market.
A breakdown by types of activity found that outsourcing was the
largest activity, accounting for 26.5% of the market, amounting to
$321.94 million. This sum includes the outsourcing of information
systems, the largest outsourcing subsector, with $188.1 million in
revenue, followed by managing and maintaining PCs and networks, and
outsourcing web-based applications and services.
Israel's information technology services market totaled $1.214
billion in 2002, 9.3% less than the $1.34 billion in 2001, states a
new IDC Israel report. IDC cites the following factors for the drop:
smaller enterprise IT budgets, especially by small and medium-sized
private companies; the drop in GDP; less investment in Israel; the
ongoing state of war; and competition between IT services companies
that led to lower sweeping lower prices in the sector.