Profit will steady as major companies shift toward higher value-added offerings
Los Angeles, CA (PRWEB) January 14, 2013
The IT Consulting industry is made up of firms that help companies design and implement information technology (IT) systems and software. Due to the low capital requirements of the industry, the majority of operators are small, nonemploying firms and independent contractors. “Over the five years to 2012, demand for all-inclusive consulting services has inspired a rash of merger and acquisition activity among larger players, with smaller, specialized companies still entering the industry,” says IBISWorld industry analyst Andrew Krabeepetcharat. “As a result, the number of industry enterprises is growing at a slower rate than the number of establishments.”
Over the five years to 2012, IT Consulting industry revenue is expected to grow an annualized 3.3% to $327.5 billion, including an increase of 3.2% in 2012 alone. A period of industry expansion occurred in 2007, when the economy was in an upswing. Demand for IT consulting from the financial services industry decreased, while demand from the government sector rose. Aided in part by this public-sector spending, revenue has risen every year since 2007, with the exception of 2009. “The revenue decline in this year occurred at the height of the recession and was due to slowed business activity and an increase in bankruptcies,” added Krabeepetcharat. “As many US businesses went bankrupt, the pool of potential clients was drastically reduced.” The industry's IT maintenance segment buoyed revenue somewhat, as business owners were reluctant to cut back on this vital service. Growth in integrated systems sales, combined with all-inclusive consulting services, boosted industry profit from 2007 to 2012.
The IT Consulting industry is highly fragmented, despite the presence of several high-profile global corporations. The industry’s low concentration is due to the abundance of independent contractors and small specialized firms in the industry. Over the past five years, the industry has experienced a period of moderate consolidation due to merger and acquisition activity among major players and increasing price competition for small firms. Large IT consulting firms have the resources to provide infrastructure and advice to growing corporate and multinational clients, providing a dynamic source of demand. As a result, small firms are at an increasing disadvantage, and industry concentration is expected to increase going forward. Although concentration is low within the industry as a whole, there is increasing consolidation among major companies, including IBM and Hewlett-Packard.
As the economy recovers, improving business sentiment and corporate profit levels will drive industry performance. Increasing M&A activity in other industries will spur demand for IT consultants; with more consolidations, companies will require assistance in the integration of accounting, information storage and other systems. Advances in cloud computing will also bolster demand for industry services as it gains greater commercial viability. Additionally, profit is projected to remain steady during this time as major companies continue to shift the balance of their services toward higher value-added offerings. Competition among major players will increase, however, as more large multinational hardware and software providers enter the industry and price competition intensifies. For more information, visit IBISWorld’s IT Consulting in the US industry report page.
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IBISWorld industry Report Key Topics
The IT Consulting industry includes firms that focus on providing the following services to client companies: writing, testing and supporting custom software; planning and designing integrated hardware, software and communication infrastructure; and on-site management of computer systems and data processing facilities. This industry excludes packaged software publishers and off-site data processing and hosting services.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
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Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.