As M&A activity rises, companies will require assistance integrating IT systems
Los Angeles, CA (PRWEB) February 13, 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 intensity of this industry, the majority of operators in this industry are nonemployers. Although new entrants continue to enter the industry, demand for all-inclusive consulting services has caused an increase in merger and acquisition (M&A) activity among larger operators in the industry over the past five years. As a result, the number of establishments is growing at an average annual rate of 2.2%, while the number of enterprises is growing at a slightly slower average annual rate of 1.9% during the five years to 2012. Over the five years to 2012, industry revenue is expected to grow at an average annual rate of 2.0% to $18.4 billion, with growth of 3.0% expected in 2012 alone. A period of strong growth 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 increased. According to IBISWorld industry analyst Andrew Krabeepetcharat, growth in integrated systems sales, combined with all-inclusive consulting services, has increased industry profit. At the height of the recession, slowed business activity and an increase in bankruptcies led to a revenue decline in 2009. As many Canadian businesses went bankrupt, the pool of potential clients was drastically reduced.
The IT Consulting industry has a very low level of market share concentration and is highly fragmented despite the presence of several high-profile multinational corporations, says Krabeepetcharat. This low concentration is due to the abundance of independent contractors and small, specialized firms in the industry. Over the past five years, the industry experienced a period of consolidation due to merger and acquisition activity among major players. Large IT consulting firms have the resources to provide infrastructure and advice to growing corporate and multinational clients, resulting in rising demand from both large and small clients. As a result, small firms and nonemployers are at an increasing disadvantage, and industry concentration is expected to increase over the next five years as larger companies acquire smaller companies.
During the five years to 2017, industry revenue is expected to grow. As the global economy recovers, improving business sentiment and corporate profit will drive industry revenue growth. The increase in M&A activity in other industries over the next five years will help IT consultants; with more consolidations, companies will require assistance integrating accounting, information storage and other systems related to IT. Over the next five years, profit is projected to remain relatively steady as major companies continue to shift the balance of their services toward higher-margin activities. However, rising competition among large multinational industry operators will increase price competition. For more information, visit IBISWorld’s IT Consulting in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry provides 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
Cost Structure Benchmarks
Barriers to Entry
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