US IT external services spending grew 5 percent in 2001, and in 2002 the industry will show a slight improvement as it’s projected to grow 8 percent, according to Dataquest, a unit of Gartner. US external services spending totalled $254 billion in 2001 and the market is forecast to reach $276 billion in 2002. By 2005, the industry is expected to surpass $395 billion. Gartner Dataquest analysts said financial services, manufacturing and government will continue to be the three largest vertical market opportunities. External IT services include consulting, application development and integration, management services and outsourcing, business process management, transaction processing, hardware and software product support, and education and training.

“Macroeconomic factors in 2001 impacted industries such as communications, manufacturing and transportation with significant industry revenue slowdowns, reduced capital expenditure and personnel layoffs,” said Robert Goodwin, vice president for Gartner Dataquest’s Global Industries Practice. “IT investment strategies for 2002 will shift to phased engagements to deal with centralised budgeting and closer IT spending scrutiny. Users will want to wring more value from effective integration of existing products, and an emphasis on delivering ROI to shareholders will continue.”

The US federal government has the highest forecast growth in external services, and spending is expected to reach $23 billion by 2005. The outlook for increased federal spending is based on the proactive response to Sept 11, an increase in defence and intelligence technology implementation, and the continuing adoption of outsourcing contracts.