IBM continues to lead the outsourcing market, despite efforts by other players to catch up, according to IDC

IBM leads the pack in the $68.5bn (£41.08bn) information technology outsourcing market, but Hewlett-Packard and a handful of overseas companies are gunning to catch up, says research company IDC.

In a recently published report, IDC said Big Blue claimed about 22 percent of the global IT outsourcing market in 2002, with $15.3bn in outsourcing services revenues. IBM seized a quarter of all US outsourcing sales last year, mainly through its Global Services unit, the report said.

Electronic Data Systems, Computer Sciences and Fujitsu nabbed the next top spots in IDC's global rankings, with $11.1bn, $3.8bn and $3.3bn in outsourcing revenues, respectively. Together the four companies command close to half of worldwide IT outsourcing revenue, IDC said.

IDC did not immediately provide historic data, so it's unclear how market shares have changed.

Outsourcing is a growing segment of the IT industry that involves companies handing off major tasks such as data centre management, software development, call centre operations, and desktop and network support, to an outside company. The selling point of such services is the promise of savings, obtained in part by farming out tasks to workers in India and other developing countries.

IDC expects the worldwide IT outsourcing services market to grow 7.7 percent a year over the next five years, to reach nearly $100bn in sales in 2007.

Although the revenues are big, the profit margins in this market can be slim. Outsourcing services companies frequently have to make substantial investments in IT equipment, facilities and personnel. Yet IBM, HP and others prize these multiyear contracts because they can help bolster higher-margin sales of hardware and software by creating a long-term, interdependent relationship with clients.

HP, which ranked just below Fujitsu with a 1.8 percent share of the global market in 2002, is one of the challengers to watch, according to IDC. The company's on-demand, or utility computing, initiatives are helping it win more outsourcing business, the report said.

Deutsche Telekom's T-Systems services unit in Germany; Fujitsu and NEC in Japan; and Cap Gemini Ernst & Young in France are looking to gain stronger footholds in the $30.6bn US market, IDC said.

Copyright © 1995-2008 CNET Networks, Inc. All rights reserved
ZDNET is a registered service mark of CNET Networks, Inc. ZDNET Logo is a service mark of CNET Networks, Inc.