Worldwide IT Services Market Definitions Guide, 2Q03 · 2 Worldwide IT Services Market Definitions Guide, ... Reports from financial analysts Information and data from online and

Worldwide IT Services MarketDefinitions Guide, 2Q03

Gartner Dataquest Guide

Publication Date: 6 August 2003

©2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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Publication Date: 6 August 2003

Worldwide IT Services MarketDefinitions Guide, 2Q03

Gartner Dataquest Guide

Authors Ellie BabaieRobert De SouzaJacqueline HengRika Narisawa

This document has been published to the following Marketplace codes:

ITSV-WW-GU-0007

For More Information...In North America and Latin America: +1-203-316-1111In Europe, the Middle East and Africa: +44 1784 267770In Asia/Pacific: +61-7-3405-2582In Japan: +81-3-3481-3670Worldwide via gartner.com: www.gartner.com

Entire contents © 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction of this publication in any formwithout prior written permission is forbidden. The information contained herein has been obtained from sources believed tobe reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shallhave no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. Thereader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressedherein are subject to change without notice. 116318

©2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. iii

Table of ContentsPage

1. Market Statistics Overview and Methodology............................................................................................. 1Accessing Statistics Databases.................................................................................................................... 1Market Share Methodology ........................................................................................................................ 1Forecasting Methodology Overview ......................................................................................................... 2

Forecasting Goals ..................................................................................................................................... 42. Overview of the IT Services Segmentation ................................................................................................... 5

Core Segmentation ....................................................................................................................................... 5Environmental Segmentation ..................................................................................................................... 5Method-of-Purchase Segmentation............................................................................................................ 5

3. Core IT Services' Segmentation Definitions .................................................................................................. 7IT Services — Definitions ............................................................................................................................ 7Product Support Services ............................................................................................................................ 7

Hardware Maintenance and Support Services .................................................................................... 7Software Maintenance and Support Services..................................................................................... 12

Professional Services .................................................................................................................................. 14Consulting ............................................................................................................................................... 14Development and Integration .............................................................................................................. 15IT Management....................................................................................................................................... 16Process Management ............................................................................................................................. 16

4. IT Services' Environmental Definitions ....................................................................................................... 195. Method-of-Purchase Definitions................................................................................................................... 21

Outsourcing................................................................................................................................................. 21Business Process Outsourcing .................................................................................................................. 21

6. Vertical Market Definitions............................................................................................................................ 23Vertical Market Forecast Components..................................................................................................... 23

Definition of IT Market Components.................................................................................................. 23Hardware................................................................................................................................................. 23Applications Software ........................................................................................................................... 28IT Services ............................................................................................................................................... 28Internal Services ..................................................................................................................................... 29Telecom Equipment ............................................................................................................................... 30Telecom Services..................................................................................................................................... 30

7. Worldwide Geographic Regional Definitions............................................................................................. 31Asia/Pacific ................................................................................................................................................. 31

Rest of Asia/Pacific................................................................................................................................ 31Western Europe........................................................................................................................................... 31

Rest of Western Europe ......................................................................................................................... 31Eastern Europe............................................................................................................................................ 31Japan ............................................................................................................................................................. 31Latin America.............................................................................................................................................. 32Middle East and Africa.............................................................................................................................. 32North America ............................................................................................................................................ 32

8. Research Metrics ............................................................................................................................................. 339. Exchange Rates................................................................................................................................................ 35Appendix A — Glossary of Terms ...................................................................................................................... 37

iv Worldwide IT Services Market Definitions Guide, 2Q03

©2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 6 August 2003

List of TablesTable Page

2-1 Core IT Services Market Segmentation ................................................................................................ 63-1 Hardware Segmentation for Hardware Maintenance and Support Service................................... 73-2 Software Segmentation for Software Maintenance and Support Service...................................... 123-3 Professional Services ............................................................................................................................. 146-1 Vertical Market Industrial Codes ........................................................................................................ 246-2 Company Size Segments ...................................................................................................................... 279-1 Prevailing Quarterly Exchange Rates ................................................................................................. 35

A-1 Report Glossary ..................................................................................................................................... 37

©2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 1

Chapter 1Market Statistics Overview and Methodology

Gartner Dataquest publishes comprehensive market share and forecaststatistics on the IT services market. These statistics are analyzed in documentson gartner.com and are available to IT Services Cluster clients as MarketViewdatabases at marketview.gartner.com.

Accessing Statistics DatabasesMarketView databases permit online data queries and Web-based datamanipulation, using either unique or pre-defined reports. In addition, eachMarketView database can be downloaded from marketview.gartner.com. Eachdownload file contains two versions of the database: one prepackaged as anExcel pivot table, and one as a .CUB file. The pivot table is based on a simpleflat file and includes definitions. The .CUB file, an industry standard version ofan Online Analytical Processing (OLAP) multidimensional database, displaysthe hierarchical structure of the IT services market model. It can be accessed bya variety of business intelligence applications, including Excel, ProClarity andCognos. Market statistics analysts in IT services are happy to help clients accessstatistics, via client inquiry.

MarketView databases are published to Gartner Dataquest clusters in thefollowing categories:

■ Market share — Market share data includes vendor revenue and totalmarket size by major service line, geography and environment presented fortwo historical years.

■ Service line forecasts — The data includes end-user spending by servicesubsegments, geography and environment presented both historically and ina five-year forecast.

■ Vertical market forecasts — The data includes end-user spending for verticalmarkets and geography for hardware, software, telecommunicationsequipment, telecommunications services, major IT services segments andinternal spending presented both historically and in a five-year forecast.

■ Outsourcing forecast — The data includes end-user spending by majorservice segment and geography for the business process outsourcing (BPO)by process, IT outsourcing, and the discrete method of purchase, presentedfor history and five-year forecast.

Market Share MethodologyEach year, we publish both preliminary and final market share statistics onapproximately 500 IT services vendors by service line, geography, verticalmarket and environment. Preliminary market share statistics are developedusing both high-level secondary research and modeling, to provide timelyestimates of the previous year's results. Sources of data used for preliminarymarket share estimates include, but are not limited to, the following:

■ Information published by major industry participants

■ Estimates made by reliable industry spokespersons

■ Government data or trade association data

■ Relevant economic data

■ Articles in both the general and the trade press

■ Published company financial reports

2 Worldwide IT Services Market Definitions Guide, 2Q03


■ Reports from financial analysts

■ Information and data from online and CD-ROM data banks

■ End-user surveys

Market share is calculated by dividing our estimate of each vendor's IT servicesrevenue by the market size. While statistics on individual vendors are based onrevenue, total market size is an estimate of end-user spending. IT servicesmarket sizing is developed by beginning with vendor revenue data for thevendors that are tracked, adding estimated revenue for remaining vendors nottracked, and subtracting an estimate for subcontracting. These estimates areinformed by Gartner Dataquest's established extensive statistics on current andpast computing and telecommunications spending, end-user survey data,economic and demographic statistics, and analyst expertise. This processallows for vendor revenue and end-user spending to be reconciled forconsistency. Information from a demand-side perspective ensures that we haveneither overestimated nor underestimated the available budgets from endusers, and supply-side data grounds our end-user spending in the reality of thetypes and quantity of services that have been delivered by services companies.

Final market share and market sizing statistics include additional directsurveys and interviews of approximately 500 major IT services vendors inAsia/Pacific, Europe, Japan, North America and Latin America, seekingestimates on the distribution of annual IT services revenue.

The information gathered from this survey enables Gartner Dataquest tomaintain its database of vendor revenue data for each market segment. Thecategories for which IT services revenue are reported are comprehensivelydefined for the purpose of providing clarity and guidance to surveyparticipants as well as those who use Gartner Dataquest's IT services marketdata. These definitions are revised, altered or expanded every quarter to reflectchanges in the IT services marketplace.

Gartner Dataquest believes its market statistics data is the most accurate andmeaningful available. Despite the care taken in gathering, analyzing andcategorizing the data, careful attention must be paid to the definitions andassumptions. Various companies, government agencies and trade associationsmay use slightly different definitions of service categories and regionalgroupings, or they may include different companies in their summaries. Thesedifferences should be kept in mind when making comparisons between dataand numbers provided by Gartner Dataquest and those provided by otherresearch organizations.

Forecasting Methodology OverviewForecasting provides a structured and logically rigorous setting in which toclarify expectations about the future, and forecasts help reduce business risk byaiding executives in planning strategy and tactics based on likely events andtrends. Our objective is to provide clients with forecasts that are useful, credibleand as accurate as possible.

Fundamental to the way Gartner Dataquest conducts its research is anunderlying philosophy that the best data and analysis come from awell-balanced program. This program includes the following:

■ Balance between primary and secondary collection techniques

■ Balance between supply-side and demand-side analysis

Market Statistics Overview and Methodology 3


■ Balance between focused industry-specific research and coordinated "bigpicture" analysis aided by integration of data from more than 25 separatehigh-technology industries that Gartner Dataquest covers

■ Balance between the perspectives of experienced industry professionals andrigorous, disciplined techniques of seasoned market researchers

Gartner Dataquest analyzes a full range of influences that can impinge on aforecast, including general macroeconomic conditions, total available market,intensity of competition, the rate of innovation among competitors andsuppliers, leadership talent, potential changes in current business models,changes in production or delivery models, access to capital, buyer behavior anddemographics, and influence of regulatory and standards bodies. Analysts alsolook at interest rate fluctuations, currency fluctuations, business expectationsand capital-spending plans. In the geopolitical arena, the group looks at tradeissues, political stability or the lack thereof, and tariffs and nontariff barriers. Inaddition, analysts consider accuracy of earlier forecasts.

The IT services forecast is developed by determining assumptions, drivers andinhibitors in the market, using a proprietary collaborative, global, real-timeforecast system. An overview of this process is illustrated in Figure 1-1. We usea mix of quantitative statistical and qualitative judgmental methods to generateforecasts. Statistical techniques are used in the early parts of our process toanchor our preliminary forecasts in historical fact. Expert judgment techniquesare then used to shape the final forecast according to analyst consensus.

Figure 1-1IT Services Forecast Methodology

Source: Gartner Dataquest (July 2003)

116318-01-01

Publicly availableinformationQuarterly vendor resultsRegular vendor briefingsEconomic anddemographic dataIndustry dataBusiness and financialindicatorsSecondary research

Vendor-/supply-side researchUser-/demand-side researchHistorical dataIT market data: semiconductorcomponents, hardware,software and telecomTechnology trends and analysisIT advisory roleScenario buildingExpert judgmentPeer review MarketViews

on gartner.com

Assumptions

Real-TimeCollaborativeForecasting

System

Internal Sources External Sources



Assumptions are tested against different points of view. An integral part of thisprocess involves comparing preliminary forecasts to related forecasts thateither flow into or flow from them. For IT services, this means carefullyexamining and taking into account related software, computer andtelecommunications forecasts. It also means the ranks of those involved in theforecast process extend beyond Gartner Dataquest's global staff of IT servicesanalysts.

The peer review of assumptions strengthens the resulting forecast, because theresult must be seen to be valid both within the context of individual marketsegments but also for the total market. This methodology provides an iterativeapproach to a final forecast in which successive preliminary forecasts arereviewed, critiqued and revised by all those involved in the forecast process.Gartner Dataquest believes that a sound forecasting process incorporates bothart and science into a logical and coherent series of steps that, if conducted in arigorous and organized fashion, will ensure forecasting effectiveness, reliabilityand accuracy and will prove a valuable tool for developing sound marketstrategies.

Forecasting GoalsWe aim to provide clients with forecasts that are useful, credible and asaccurate as possible. Because it is impossible to always be correct, it isimportant to provide clients with details of the assumptions that built theforecast. Gartner Dataquest realizes that clients evaluate the forecast'scredibility by evaluating both the historical accuracy and the quality of writtenforecast assumptions. This does not imply that a conservative approach iscalled for; where we fail to forecast a completely new market, we have failed toinform the client of an opportunity. Gartner Dataquest uses tools and processesthat maximize our overall presence in the market research industry by sharingprocesses and time frames, so that a unified, coherent picture of the IT marketis built.

For several years the process of developing IT market forecasts has beenundergoing continued refinement at Gartner Dataquest. Today, the processdraws on Gartner Dataquest's industry experts and client feedback to devise aforecast that is consistent internally and meets client expectations. The processassimilates vast amounts of both disparate and aggregated data that is moldedinto a forecast that is scrutinized and scrubbed by many seasoned analysts. Thecompletion of a typical long-term forecast takes three to six weeks, dependingon the service area, with several major steps.

The amount of time and effort that goes into a forecast varies from period toperiod and also depends heavily on the technology area being forecast.Generally, forecasts produced after the release of annual data are the mosttime-consuming and require the most attention. Also, unexpected economicdevelopments can also affect the complexity and duration of the forecastingprocess.


Chapter 2Overview of the IT Services Segmentation

Gartner Dataquest's IT services programs segment and forecast the marketacross several different dimensions. In this manner, the total marketplace canbe viewed by readers in whichever manner most closely fits their view of themarketplace. These different dimensions are reviewed in detail below.

Core SegmentationThe IT services market can be segmented by the type of skills that areemployed to deliver the service. This has been the traditional means to segmentthis market space. This core segmentation includes both product support(formerly traditional) and professional services. Product support services arefurther segmented by either hardware or software product types. Table 2-1details the components of the various services segments. Definitions for thecore segments can be found in Chapter 3.

Environmental SegmentationThe core services segmentation can be further broken down by environment.All services can be associated with the major platforms for which the work hasbeen rendered. Gartner Dataquest's IT services group has identified three mainenvironments:

■ Desktop/client

■ Server/host

■ Connectivity

❑ LAN

❑ WAN

❑ Corporate customer premises equipment (CPE)

❑ Public network

As shown in the above list, the connectivity environment is further segmentedinto LAN, WAN (networking services), corporate CPE and public network(telecommunication services). Please refer to Chapter 4 for environmentaldefinitions.

Method-of-Purchase SegmentationAnother way to view the services market is by how services are delivered toand contracted by customers. Generally, customers contract services for eithera project or for a specific type of service (discrete) or for a multiyearrelationship that includes multiple service components and management of anIT asset, infrastructure, or business process (outsourced). Further definitionsfor methods of purchase can be found in Chapter 5.

Method-of-purchase segmentation include the following:

■ Discrete

■ Outsourced

❑ IT outsourcing

❑ BPO



Table 2-1Core IT Services Market Segmentation

Service Level 1 Service Level 2 Service Level 3 Service Level 4

Product Support Hardware maintenance andsupport

Client computing hardwareservices

Personal computer services

Workstation services

Document managementhardware services

Copier services

Server printer services

Enterprise computinghardware services

Server appliance services

Server hardware services

Storage subsystem hardwareservices

Other storage subsystemservices

RAID-based storage systemservices

Telecom equipment supportservices

Enterprise equipmentservices

Infrastructure equipmentservices

Software maintenance andsupport

Applications softwareservices

Back-office/ERP and supplychain software services

Collaborative and personalsoftware services

Engineering softwareservices

Front-office/CRM softwareservices

Infrastructure softwareservices

Applications developmentand middleware softwareservices

Information managementsoftware services

Other infrastructure softwareservices

Storage managementsoftware services

System and networksoftware services

OS software services Microsoft OS services

Other OS services

Unix OS services

Professional Services Consulting Business consulting

IT consulting

Development and integration Application development

Deployment

Integration

IT management Applications management

Help desk management

Operations services

Process management



Chapter 3Core IT Services' Segmentation Definitions

IT Services — DefinitionsIT services refer to the application of business and technical expertise toenable organizations in the creation, management, optimization or access toinformation and business processes.

Product Support Services

Hardware Maintenance and Support ServicesThese are preventive and remedial services that physically repair or optimizehardware, including basic installation, contract maintenance, and per-incidentrepair, both on-site or at a centralized repair depot. Hardware support alsoincludes telephone technical troubleshooting and assistance for setup and allfee-based hardware warranty upgrades. Exclusive of parts bundled intomaintenance contracts, sales of all parts used to repair high-tech equipment incarry-in, mail-in, or per-incident on-site delivery modes, or purchased byinternal staff to perform the repair, are included. This segment includes onlyexternal customer spending on these services. Table 3-1 lists the different typesof hardware covered in the hardware maintenance and support services.

Client Computing Hardware ServicesThis segment includes PC services and workstation services.

Personal ComputersA PC is a general-purpose computer that is distinguished from othercomputers by its adherence to hardware and software compatibility. Thiscompatibility drives high unit volumes of commoditylike products that do notrequire on-site technical support. High-performance features (such asnetworking, graphics and a virtual multiuser/multitasking OS) are normallyoptional and not integral system features. IBM/IBM-compatible and MacintoshPCs are two platforms in this product segment. A single-user PC's residentoperating system is typically DOS, OS/2 or Mac OS. PCs have a performanceceiling that is lower in system compute performance, input/output (I/O)channel speed and disk speed than advanced workstations.

Table 3-1Hardware Segmentation for Hardware Maintenance and Support Service

Service Level 1 Service Level 2 Service Level 3

Hardware maintenance and support Client computing hardware services Personal computer services

Workstation services

Document management hardwareservices

Copier services

Server printer services

Enterprise computing hardwareservices

Server appliance services

Server hardware services

Storage subsystem hardware services Other storage subsystem services

RAID-based storage system services

Telecom equipment support services Enterprise equipment services

Infrastructure equipment services




Normally, standard graphics are in the 760 x 1280-pixel range, and optionalhigh-end graphics are limited compared with workstations. A PC system is asingle unit, which includes a CPU, a monitor and a keyboard. Furthermore, PCshipment data does not include systems assembled from component partspurchased in electronic stores or other outlets. A high-performance computer isdesigned for either numerically intensive applications or commercial functionsthat require extensive and rapid computational capabilities. These systemsinclude computing technologies such as vector, superscalar symmetricmultiprocessing (SMP) and massively parallel processing. Massively parallelprocessing systems are defined as a system configured with 32 or moreprocessors. Typically, these systems run in cool rooms (with or without raisedfloors) or environmentally controlled office habitats and require a dedicatedsupport organization. Applications that lend themselves to the supercomputerplatform include atmospheric simulation, pharmacological testing and nucleardevelopment as well as very high-level decision support and online analysis.

WorkstationWorkstations are typically based on high-end Intel or reduced instruction setcomputer (RISC) CPU architectures with high-performance graphics, OS andsystem architecture. In general, workstations must include integratedfloating-point processing, integrated networking, a 32-bit or 64-bit multitaskingOS, high-resolution two-dimensional (2-D) graphics capabilities (typically1-megapixel display), as well as configurations that support high-performancethree-dimensional (3-D) graphics functionality. The workstation marketincludes traditional Unix workstations, workstations running Windows NT orproprietary OSs, and other advanced OSs, such as NeXTSTEP and Solaris.Workstations are classified by the primary market for which they are designed.Workstations are further segmented into one of three categories: entry-levelworkstation, midrange workstation and superworkstation. Apple PowerMacintosh systems are not considered workstations and are included in the PCclassification.

Document Management Hardware ServicesThis segment includes copier and printer services.

CopiersCopiers include both analog (optical technology) and digital (digital scanningand printing technology) copiers as follows:

■ Analog copiers — Image capture and transfer using optical or "light lens"technology in which the image is flash-illuminated on the platen, thentransferred to the photoconductor through a series of lenses and mirrors. Thelatent image is then transferred from the photoconductor to paper throughthe electrophotographic process.

■ Digital copiers — Image capture using digital scanning and image transferusing electronic impulse in which the image is scanned from the platen anddigitized into electronic data. The electronic data is processed to enable theimage to be transferred to the photoconductor. The electronic image data isthen transferred to the photoconductor through the light impulses of a laseror light-emitting diode (LED) to "write" the image to the photoconductormaterial. The latent image is then transferred from the photoconductor topaper through the electrophotographic process, as with an analog copier.

Core IT Services' Segmentation Definitions 9


PrintersA printer is the peripheral output device of a computer system for producingcomputer-generated images on paper using a number of different markingtechnologies. To be classified in this segmentation, the device needs to becapable of using plain or coated papers with a minimum size of InternationalOrganization for Standardization (ISO) A4, U.S. size A (letter), or continuousforms with an 8-inch print width or greater, but excludes products that supportpaper widths above A2 or U.S. size C (17 x 22 inches). The definition alsoexcludes other classes of application-specific printers, such as point-of-saleprinters, video printers and dedicated photo printers.

Enterprise Computing Hardware ServicesThis segment includes server appliance services and server hardware services.

Server ApplianceA server appliance is a specialized network-based hardware device designed toperform a single or specialized set of server functions. It provides end userswith a complete solution with combined hardware and software, has minimumOS presence and requires no per-seat network OS license. Client access isindependent of any OS or proprietary protocol. In addition, the device is a"closed box" delivering extreme ease of installation, minimal maintenance andcan be managed by the client via a Web browser.

Server appliances consist of caching, multipurpose, Web, small business andothers as follows:

■ Caching appliances — These appliances store locally the static content of thefirst requested Web page of a remote origin server so that the subsequentrequests for the same page can be delivered to the local user on the samenetwork at a much faster speed, reducing the redundant Internet traffic andsaving bandwidth. This kind of deployment is the so-called "forward proxymode." In a "reverse proxy mode," the caching appliance is placed in front ofthe original Web server to help deliver the static content of the Web serverand serve as a buffer to protect the Web server from heavy hits. Midrangecaching appliances are those that can support up to T1 (1.5 Mbps) datathroughput. High-end caching appliances are those that can support T3(43 Mbps) or greater data throughput.

■ Multifunction — These products provide basic networking functions, suchas shared Internet access with basic firewall, e-mail and file/print sharing.Some products also incorporate other functions such as e-commerce, remoteaccess/virtual private network (VPN), proxy, collaboration, groupscheduling and integrated voice mail and e-mail. Some have built-in WANconnection, while others don't. Examples in this category include CobaltNetwork's Qube, IBM's Whistle InterJet, eSoft's Team Internet and EncantoNetworks' e.go.

■ Web server appliances — These server appliances integrate standard Webserver software such as Apache, which is used in Web publishing anddelivering HTTP Web content and provides support for Web applicationswith simple database access, custom scripting, Common Gateway Interface(CGI) and plug-in extension capabilities. Additional functions such as e-mailand File Transfer Protocol (FTP) server may also be found in Web serverappliances. Examples of midrange Web server appliances include CobaltNetwork's RaQ products and Dell's PowerApp.Web.

■ Other applications — These server appliances are typically single-functionproducts that are no longer sold in large volumes. Existing applicationsinclude e-mail, Web serving and Web publishing. Examples in this categoryinclude Technaut's eServer.mail and eServer.publish and Intel's InBusinesseMailStation.



Server Hardware ServicesThis segment includes workstations that are single-user systems such ashigh-end, midrange and entry-level workstations.

Workstations are typically high-end complex instruction set computer (CISC),Explicitly Parallel Instruction Computing (EPIC) or RISC-based CPUarchitectures with high-performance graphics, OS and system architecture. Ingeneral, workstations must include integrated floating-point processing,integrated networking, a 32-bit or 64-bit multitasking OS, as well asconfigurations that support high-resolution graphics capabilities and 3-Dgraphics functionality. The workstation market includes traditional Unixworkstations including Linux and workstations running Windows NT/2000 orother advanced OSs.

Gartner Dataquest classifies workstations by the primary market for whichthey are designed and thus bases its data collection on desktops branded asworkstations. Systems shipped with Windows 95/98 are generally counted asPCs and not included in the workstation category and, because they are notbranded as workstations, neither are Apple Macintosh desktops. Examples ofIA-32-based workstations are IBM's IntelliStation family, the Compaq EvoWorkstations, Dell Precision Workstations and HP Workstations. Note that theIA category refers to IA-compatible, x86 CPU-based workstations and covers avariety of chipset and processor designs not offered by Intel. Note also thatthe IPF and 64-bit extensions to CISC architecture such as AMD's Hammer-architecture-based workstations will be listed under title IA-64.

Entry-Level WorkstationAn entry-level workstation is a system with a typical base price between $2,000and $5,000, usually priced less than $10,000 for a fully configured system. Thesesystems are typically cost-reduced models targeted at price-sensitive end users.They mainly run 2-D graphics with some limited 3-D graphics capabilities thatmay be integrated on the system motherboard. Typically, entry-levelworkstations do not have the expandability of midrange workstations andcannot achieve the same levels of application performance or other capabilitiesavailable in more-expensive models. They typically come in uniprocessorconfigurations but are occasionally scalable to two CPUs. Most IA-32-compatible entry-level workstations are based on the Pentium as opposed tothe Xeon family of processors. Examples of entry-level workstations includeDell Precision 340, HP Workstation x1100, IBM E-Pro, Compaq EvoWorkstation W4000, SGI O2 and Sun Sunblade 100.

Midrange WorkstationThe midrange classification is the traditional workstation configuration that isdesigned for the technical user who requires more power, better graphics andlarger amounts of memory and storage. These are usually desktop systems thatdiffer from the entry-level models in that they typically have higherperformance, full-function 3-D graphics capabilities and offer moreexpandability. They are typically dual-processor scalable. Midrange systemsusually have a starting price between $4,000 and $15,000. The list price of afully configured model with the fastest processor options and top-of-the-linegraphics subsystems can be as much as two to three times the price of aminimally configured system and higher than the entry point for a high-endworkstation. Most IA-32-compatible midrange workstations are based on theXeon family of processors. Examples of midrange workstations include DellPrecision 530, HP Workstation c series, IBM Z-Pro, Sun Sunblade 2000,Compaq Evo Workstation W8000 and SGI Octane.



High-End WorkstationThe high-end workstation typically has the highest combination of CPU andgraphics performance. It has the most expansion capability for adding memoryand internal disks and is usually a deskside package. High-end workstations/superworkstations are designed to address the most-demanding scientific,engineering and other computationally oriented problems, frequently withlarge data sets. The systems can be acquired and run by a single user but aresometimes deployed to support multiple users. Multiprocessing capabilitiesfirst appeared in this category, and typically they are the entry points for newadvanced technology into the workstation market. Base prices for RISChigh-end workstations can start as low as $20,000 for a minimally configuredsystem and can go up to more than $200,000 for multi-CPU systems that areessentially graphics supercomputers capable of handling very large andcomplex data models. Examples of high-end workstations include the four-wayHP Workstation j series, Sun's Ultra 80 and the SGI Onyx2 Reality family.

Storage Subsystem Hardware ServicesThis segment includes other storage subsystem services and redundant array ofindependent disks (RAID)-based storage system services.

Tape ProductsThis category includes all segments of tape drives used for computer storage.This forecast includes storage devices that are stand-alone only. Storage that isenclosed within a computer shipment is included in the computer systemssegment. This methodology avoids double counting. Controllers andsubsystems are also factored in.

Redundant Array of Independent DisksThis category includes the total of all external RAID. RAID is a set of diskdrives (at least three) that I/O activity is managed from either host-basedsoftware or a controller.

Telecom Equipment Support ServicesThis segment includes enterprise equipment services and infrastructureequipment services.

Enterprise EquipmentEnterprise equipment comprises telecommunications equipment and systemsthat are based in consumer and business locations and that connect either withthe public switched telephone network (PSTN) or to private data voicenetworks.

Infrastructure EquipmentInfrastructure equipment includes all forms of equipment (and some systemsand even integrally related services) that combine to form the communicationsnetworks used by public service operators worldwide. A good example is thePSTN. Others include IP and other data networks as well as mobile networks.Infrastructure equipment is segmented into six major building blocks:switching, transport, access, signaling, support and mobile infrastructure.



Software Maintenance and Support ServicesThese services include revenue derived from long-term and pay-as-you-gosupport contracts. Technical support contracts include telephone and onlinetroubleshooting, installation assistance, and basic usability assistance. Softwaremaintenance includes support contracts and custom software updates.Software products and technologies covered under this category include OSs;application software; and systems and network management software, toolsand utilities. Table 3-2 lists the different types of software covered in thesoftware maintenance and support services.

Applications SoftwareThis segment includes back-office, enterprise resource planning (ERP) andsupply chain software services as well as collaborative and personal softwareservices. It also covers engineering software and front-office/customerrelationship management (CRM) software services.

Back Office/ERP and Supply ChainThe back-office/ERP and supply chain sector comprises applications formanufacturing and services, human resource management systems (HRMSs)and financial management systems (FMSs), and processes that encompass atrading partner community.

Collaborative and PersonalThe collaborative and personal market sector covers software products, toolsand hosted services that support collaboration and knowledge management asa generic capability, and the balance of PC applications used by enterprises.

Table 3-2Software Segmentation for Software Maintenance and Support Service

Level 1 Level 2 Level 3

Software Maintenance and Support Applications software services Back-office/ERP and supply chainsoftware services

Collaborative and personal softwareservices

Engineering software services

Front-office/CRM software services

Infrastructure software services

Applications development andmiddleware software services

Information management softwareservices

Other infrastructure software services

Storage management software services

System and network software services

OS software services Microsoft OS services

Other OS services

Unix OS services




Design and EngineeringThis software sector includes architectural, engineering and construction(AEC), electronic design automation (EDA), embedded software tools,computer-aided design/manufacturing/engineering (CAD/CAM/CAE), andproduct data management (PDM).

Front Office/CRMThe front-office/CRM software sector, part of the enterprise software market,provides functionality to enterprises in four segments: sales, marketing, call/contact center, and customer service and support.

Infrastructure SoftwareThis segment includes applications development (AD) and middlewaresoftware, information management software, other infrastructure software,storage management software, system and network software services.

AD and MiddlewareAD toolsets support the planning, design, construction, quality and operationof applications. Application integration and middleware (AIM) is the systemsoftware or runtime infrastructure used to provide intra- and interapplicationcommunications.

Information ManagementThis sector includes database management systems (DBMSs) used for datastorage and organization, business intelligence (BI) analytic software productsthat store, access and analyze complex data, and data warehouse mining andquality tools.

Other InfrastructureThis includes embedded software tools, business intelligence and datawarehousing tools, DBMS and security software.

Storage ManagementProducts in this segment provide basic data organization functions such as filesystems, volume management and physical replication to ensure data integrityand availability by offering fast failure recovery and data redundancy.Network file systems, high-availability (such as clustering) software, anddatabase replication and synchronization products are not included. Productsused to sort data or those for file transfer are also not included.

System and NetworkSystem and network management tools help manage the provisioning,capacity, performance and availability of IT systems, security software isincluded to control and monitor access to internal and external IT resources.

OS SoftwareGartner Dataquest defines an OS as software that maps logical constructs tophysical locations in the computer. The system is the program that lets a useraccess data by a file name without knowing where the file is physically locatedon the disk. The OS controls the computer's operations by managing disk,screen, file maintenance and printer activity while loading and runningapplication programs. This segment includes Microsoft, Unix and other OSs.

Microsoft Windows 16-BitMicrosoft's 16-bit operating environment (Windows 3.x) runs on top of DOS. Itallows the display of several individual screens at one time and enables theuser to switch between several windows. This encompasses all Windows 3.xproducts.



Microsoft Windows 32-BitThis includes Windows 9x and Windows NT Workstations. Windows 9x isMicrosoft's 32-bit OS and graphical user interface (GUI) for desktop PCs, whileWindows NT Workstation is an operating environment for workstations.

Microsoft Windows NT Server and Windows 2000 ServerThese are Microsoft's 32-bit operating environments for servers and networks.

UnixOriginally developed at AT&T Bell Laboratories, Unix is a 32-bit, multitasking,multiuser OS, which is portable and can be found on most CISC and RISCCPUs, including Intel Pentium and 80xxx, Motorola 68xxx and Sun SPARC.

Other OSsOther OSs includes Multiple Virtual Storage (MVS), Virtual Machine (VM), andOS/390 and z/OS, which are IBM's OSs for System 390 mainframe and e-serverzSeries computers. It also includes Linux, which is an open-source version ofUnix and Java. Although it is not a truly complete OS, the Java platformprovides much of the same functionality and is the focus of increasingdevelopment activity.

Professional ServicesTable 3-3 shows the segmentation covered under professional services.

ConsultingConsulting services are advisory services to help companies analyze andimprove the efficacy of business operations and technology strategies.Consulting services include two subsegments; business and IT consulting.

Table 3-3Professional Services

Level 1 Level 2 Level 3

Professional Services Consulting Business consulting

IT consulting

Development and integration Applications development

Deployment

Integration

IT management Applications management

Help desk management

Operations services

Process management




Business ConsultingBusiness consulting services are advisory services that influence the adoptionof IT. These business consulting services are intended to improve businessoperational efficiencies, transform established businesses or create newbusinesses via information technology. Business consulting activities includecorporate strategy planning, review of business plans, business processanalysis or re-engineering, and business requirements analysis, as well aschange management and organizational consulting pertaining to the adoptionof IT solutions. Some service examples include product/market portfolioconsulting, corporate development, R&D, sales and marketing consulting,operations strategy, organization management and reorganization, operationaleffectiveness management, strategic sourcing, and supply chain management.Business consulting services typically preface the design of IT solutions.

IT ConsultingIT consulting services are advisory services that help clients assess differenttechnology strategies and, in doing so, align their technology strategy withtheir business or process strategy. These services support customers' ITinitiatives by providing strategic, architectural, operational andimplementation planning. Strategic planning includes advisory services thathelp clients assess their information technology needs and formulate systemimplementation plans. Architecture planning includes advisory services thatcombine strategic plans and knowledge of emerging technologies to create thelogical design of the system and the supporting infrastructure to meet customerrequirements. Operational assessment/benchmarking includes services thatassess the operating efficiency and capacity of a client's IT environment.Implementation planning includes services aimed at advising customers on therollout and testing of new solutions deployment.

Development and IntegrationDevelopment and integration services customize or develop IT solutions, assetsand processes and then integrate these solutions, assets and processes withestablished infrastructure and processes. Development and integration servicesimplement designs conceived by consultants. Development and integrationservices include three subsegments: AD services, integration services anddeployment services.

Applications DevelopmentAD services create new functionality for custom-developed or packagedapplications. AD services frequently serve to integrate or link internal orexternal business processes. These services may include conversionapplications to run on different platforms or architectures.

DeploymentDeployment services support the implementation and rollout of newapplications or infrastructure. Activities may include hardware or softwareprocurement, configuration, tuning, staging, installation, and interoperabilitytesting.

IntegrationIntegration services are detailed design, implementation and managementservices that link applications (custom or prepackaged) to each other or withthe existing or planned IT infrastructure. Specific activities might includeproject planning, project management, detailed design or implementation ofapplication programming interfaces.



IT ManagementIT management services provide day-to-day management and operation of ITassets and processes. As such, they represent the core value components of IToutsourcing. Management services include three subsegments, operationalservices, applications management services, and help desk managementservices.

Applications ManagementApplications management provides a wide variety of services, processes andmethodologies for maintaining, enhancing and managing both custom andpackaged software applications.

Help Desk ManagementThese services provide centralized information and support managementservice to handle a company's internal queries and operational problems aboutIT-related processes, policies, systems and usage. Services include hardwareand software support, logging of problems, dispatch of service technicians orparts, training coordination, and other IT-related issues.

Operations ServicesThese services handle the transfer of all or part of the day-to-day systemmanagement responsibility for a customer's IT infrastructure (host/data center,client/desktop or connectivity/network) and, in some cases, the transfer ofownership of the technology or personnel assets to an outside vendor. Servicesmay include systems operation or support, administration, security,performance monitoring, technical diagnostics/troubleshooting, configurationmanagement, system repair management, and generation of managementreports. Also included are services to manage and implement businesscontinuation processes. Also included is the management of technology assets.

Process ManagementProcess management represents the core element of a BPO service, namely, thetransaction processing and business management components of BPOengagements. A typical BPO contract includes discrete project-based ITservices (such as consulting, development and integration), ongoing ITmanagement services and process management. To avoid double counting ofdiscrete IT services and IT management, Gartner Dataquest reports onlyprocess management revenue and not total BPO revenue in its core forecast.The process management component of BPO varies from process to process butrepresents approximately 60 percent to 70 percent of the BPO market.

BPO ProcessesThe BPO processes are as follows:

■ Enterprise services, which include:

❑ HR — These processes are payroll, online benefit enrollment, health andwelfare benefits administration, defined contribution programadministration, flexible spending account, administration, ConsolidatedOmnibus Budget Reconciliation Act (COBRA) administration, recruiting,background checking, education and training, contingent workforcemanagement and other HR processes ("expat" administration,organizational development, compensation planning and strategy).



❑ Finance and accounting — This category consists of accounts payable(including travel and expenses), accounts receivable, billing, generalledger, tax management, treasury and cash management, managementaccounting, electronic payments (such as credit card or automatedclearinghouse [ACH]), reconciliation of "suspense" account balances, yieldanalysis, preparing asset schedules, risk analytics, and other finance andaccounting.

❑ Payment services — These services encompass paper checks, checkelectronification, electronic data interchange (EDI), business and corporatecredit cards, letters or lines of credit, ACH, electronic invoice andpayment, insurance (such as excess value, credit, flexible parcel or collecton delivery secure).

❑ Administration — This category of processes includes documentmanagement, asset management, real estate management and otheradministration.

■ Supply management, which includes:

❑ Buying processes — Buying processes include both direct procurementand indirect procurement.

❑ Storing processes — This process covers warehouse/inventorymanagement.

❑ Moving processes — These processes include logistics and transportation(both domestic and international), distribution, supply chain planning andother SCM processes.

■ Demand management processes are as follows:

❑ Customer selection — This process consists of market segmentation/prospect data access and analysis, campaign design and communicationsplanning.

❑ Customer acquisition — Customer acquisition includes leadmanagement/opportunity management and field sales automation.

❑ Customer retention — Customer retention includes telesales,telemarketing, Web sales and marketing, self-service, inquiry handling/problem resolution and field service automation.

❑ Customer extension — Customer extension encompasses customer dataanalytics, upsell/cross-sell, other sales, marketing and customer careprocesses.

■ Operations include the following:

❑ Financial services operations — These operations include core banking(including customer information, demand deposit and savings accounts,certificates of deposit and loans), mortgage banking (loan origination andprocessing), vehicle financing (vehicle leasing and lending), cashmanagement, credit card issuing: retail credit card merchant processing,retail business and corporate credit card issuing and processing, ACH/electronic funds transfer (EFT), electronic invoice presentment andpayment, check processing and imaging, electronic checks, exceptionprocessing and automation, trade services (as necessary: cargo andbusiness insurance), Internet banking, Internet lending, trust (asnecessary: retirement and custodial plan trust and administrationservices), investments and trading, investment portfolio management(insurance), pension administration (insurance), claims processing(insurance), primary business applications (insurance), policyunderwriting (insurance), policy servicing and administration (insurance),actuarial (insurance), all data processing (insurance) and datawarehousing (insurance).



❑ Government and education operations — These operations covereligibility verification (government), fingerprint identification(government), ticket collections (government), reservations management(government), visa processing (government), student admissionadministration (education) and e-learning.

❑ Manufacturing operations — These operations include genomics (lifesciences), target identification (life sciences), target validation (lifesciences), lead generation (life sciences), lead optimization (life sciences),bioinformatics (life sciences), clinical trials (life sciences), post-marketingclinical trials (life sciences), clinical trials supply chain (life sciences),regulatory document submission (life sciences), validation (life sciences),research, development and engineering, and quality control.

❑ Retail, wholesale and transportation operations — These operations covermerchandising (retail), reservations management (transportation) andseat allocation (transportation).

❑ Healthcare operations — These operations encompass patient datamanagement, medical records, medical coding and sick patient call center.

❑ Communications and utilities operations — These operations covercommunications billing, utilities billing, exploration (if necessary,surveying and evaluation), appraisal, appraisal drilling and boundarydetermination, undeveloped leasehold acquisition) processes,development (project planning and development logistics) processes,disposal (environmental compliance and site remediation) processes,production (reservoir modeling/depletion planning, productionmanagement, production sharing, recovery planning and management)processes, environmental health and safety (EH&S), such as dangerousgoods management, industrial hygiene and safety, occupational healthprocesses, installation services (for example, meter reading validation,work dispatching/scheduling and order processing) processes, andenergy capital management (for example, load profiling, deal capturemanagement, forecasting, settlement, financial risk management)processes.


Chapter 4IT Services' Environmental Definitions

Environment refers to hardware platform. All product support andprofessional services are performed for the following environments:

■ Desktop/client (including PC servers) — Mobile, desktop PCs, PC serversand workstation products

■ Server/host — midrange servers, mainframes and supercomputers

■ Connectivity — network interface cards, hubs, bridges, routers, switches,multiplexers, frame relay, cell relays, PBXs, automatic call directors, keysystems, voice messaging systems, public network switching, transmissionequipment, and servers dedicated or primarily used for networking

Within connectivity, there are four subplatforms:

■ LAN — The hardware, software, and peripherals that enable connection of adevice to a cable-based or wireless network system that serves a building ora campus environment. Excluded are point-to-point connections(half-duplex transmissions) or connections that use a private branchexchange (PBX) or data PBX as a medium. Devices within the LANsubplatform are network interface cards (NICs), hubs, bridges, routers andswitches.

■ WAN — A data network that extends the reach of the local LAN to othergeographically separate LANs through the use of the public network,typically, common carrier lines. Devices within the WAN subplatform aredata service units/channel service units (DSUs/CSUs), modems,multiplexers, frame relay and cell relay devices. This definition includesservices to integrate and support business use of the Internet, privateintranets and community extranets.

■ Corporate CPE — The telecommunications equipment that resides oncustomer premises that primarily transmits voice traffic, although someportion may transmit data traffic to the WAN. Devices within the corporateCPE subplatform are: PBX, key systems, voice mail and messaging systems,and interactive voice response (IVR)/ACD systems.

■ Public network—The network operated by public telephone operators andother common carriers, which provides circuit-switched, packet-switched,and leased lines to the public and which may be used to transmit voice ordata packets between points. Devices within the public network includepublic network switching equipment (central office switches) and publicnetwork transmission equipment (Synchronous Digital Hierarchy (SDH)multiplexers, non-SDH multiplexers, cross-connects, digital loop carriers,broadband loops, high-bit-rate DSL (HDSL) and asynchronous DSL (ADSL).Also included in this category is equipment that uses wireless technology toform part of the public network. Examples include mobile networkinfrastructure and microwave equipment and satellite systems.




Chapter 5Method-of-Purchase Definitions

The IT services market can be divided by the primary methods of purchaseused by end users and service providers:

■ Discrete — Project-specific contractual arrangement, with a predeterminedscope of work to be completed within a given time period. Discrete projectsmay last a few weeks to several years, depending on the project. Typicalprojects can include, but are not limited to, year 2000 remediation,euro-related conversions, customer application development, legacytransition services, and enterprise application integration and deployment.

■ Outsourcing — Annuity-based contractual arrangement that details how anorganization will provision services on an ongoing basis at a specified levelof competency. Outsourcing arrangements usually last between two and fiveyears, but may be either shorter or longer. Outsourcing includes both ITinfrastructure and business processes. Outsourcing agreements alwaysinclude services from the management category, transaction processing orbusiness management segments and may include services from the productsupport, consulting, development and integration, or education andtraining. As part of an outsourcing agreement, the external service provider(ESP) may either take over the physical assets and infrastructure of a client orprovide access to existing infrastructure owned by the outsourcer.

OutsourcingOutsourcing services can be viewed as a portfolio of product support andprofessional services that are brought together to provide the client with the ITinfrastructure, applications, capabilities, and business processes to help ensurethe successful mission of the organization. Outsourcing is divided into IToutsourcing and BPO (which in part is composed of IT services and thereforeoverlaps with IT outsourcing).

Business Process OutsourcingGartner Dataquest defines BPO as the delegation of one or more IT-intensivebusiness processes to an external provider that, in turn, owns, administratesand manages the selected process(es) based on defined and measurableperformance metrics. Examples of business processes that are outsourced to anESP include logistics, procurement, HR, finance and accounting, CRM, or otheradministrative or customer-facing business functions.




Chapter 6Vertical Market Definitions

Vertical segments for Gartner Dataquest's IT services group have been definedas outlined in Table 6-1. ISIC is the International Standard Industry Code. SICis the Standard Industry code in wide use in the United States. NAICS is theemerging North America Industry Code and standards. Company sizesegmentation is shown in Table 6-2.

Vertical Market Forecast ComponentsThe vertical market forecast reflects total IT spending for each respectiveindustry. Total IT spending consists of IT budget components of hardware,software, external services, telecom equipment and telecom services as well asinternal spending.

Definition of IT Market ComponentsBusiness IT spending encompasses all third-party market transactions byend-users in both public and private organizations. Components spendingrefers to total IT spending within a given industry end-user budget.Components spending of hardware, software, external services, telecomequipment and services, and internal services spending is further outlined inthis section.

HardwareHardware includes computer hardware. The hardware category is made up ofthe computing unit, peripherals and a variety of user input/output devices.Examples include PCs (desktop, deskside, laptop, notebook, ultraportable andtransportable), servers (entry-level, midrange, mainframe and supercomputer),server appliance (caching, multifunction, Web and e-mail), workstations(entry-level, midrange and supercomputer), and peripherals (storage, printers,copiers, fax, disk arrays and additional storage).

Client ComputingClient computing entails the following:

■ PCs — PCs are single-user systems including deskbased, notebook andultraportable PCs.

■ Workstations — Workstations are single-user systems including high-end,midrange and entry-level workstations.

■ PDAs — PDAs are handheld computers designed for comfortable use in auser's hand.

Enterprise ComputingEnterprise computer includes the following:

■ Servers — This category consists of various multiuser systems includingsupercomputers, mainframes and servers.

■ Server appliances — A server appliance is a specialized network-basedhardware device designed to perform a single or specialized set of serverfunctions. It provides end users with a complete solution with combinedhardware and software, has minimum OS presence and requires no per-seatnetwork OS license. Client access is independent of any OS or proprietaryprotocol. In addition, the device is a "closed box" delivering extreme ease ofinstallation and minimal maintenance and can be managed by the client via aWeb browser. Server appliances consist of caching, multipurpose, Web,small business and other applications.



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Storage SubsystemsStorage subsystems include the following:

■ RAID-based storage systems — This category includes the total of allexternal, host-attached, and network-attached RAID. RAID refers to a set ofdisk drives (at least three) that manage I/O activity by either host-basedsoftware or a controller.

■ Storage network infrastructure — Segmentation of the storage networkinfrastructure market reflects the reality that, in 2002, Fibre Channel (FC)products overwhelmingly dominated the market. However, thesegmentation recognizes the expected emergence and growth of productsbased on the Small Computer Systems Interface over IP (iSCSI) andInfiniBand Architecture (IBA) and products that bridge iSCSI and IBA to FCstorage area networks (SANs). The five market segments are FC SANcomponents, FC SAN extenders, iSCSI initiators, iSCSI-FC bridge products,and IBA-FC bridge products.

■ Storage management software — Storage management software is the sumof all of the segments below and represents all of the tools needed to managecapacity, performance and availability of data stored on disks, tapes andoptical devices and the networking devices that this data may pass through.This segment has three subsegments: storage infrastructure, datamanagement and ESRM.

■ Other storage subsystems — This category includes tape libraries, opticallibraries and HDD upgrades/replacements.

Digital Document and ImagingDigital document and imaging include the following:

■ Copiers — Copiers perform image capture and transfer. This categoryincludes both analog (optical technology) and digital (digital scanning andprinting technology) copiers.

■ Printers — A printer is the peripheral output device of a computer systemfor producing computer-generated images on paper using various markingtechnologies. To be classified in this segment, the device needs to be capableof using plain or coated papers with a minimum size of ISO A4, U.S. size A(letter) or continuous forms with an 8-inch print width or greater, but itexcludes products that support paper widths above A2 or U.S. size C (17 x 22inches). The definition also excludes other classes of application-specificprinters, such as point-of-sale printers, video printers and dedicated photoprinters.

Table 6-2Company Size Segments

Primary Cut (Head Count) Optional, Secondary (Turnover)

Small and Midsize Business

Very Small/SOHO 1-19 -

Small 20-99 Less than $49.9 million

Low-End MSB 100-499 -

High-End MSB 500-999 $50 million to $249 million

Large Business

Large 1,000-2,499 $250 million to $999 million

Very Large 2,500-4,999 $1 billion to $2.49 billion

Mega 5,000 or more Greater than $2.5 billion

Source Gartner Dataquest (June 2003)



■ Software includes infrastructure software (AD and middleware, informationmanagement, storage management, systems/utilities software and networkoperation software), hardware OSs software and application software. Thesecomponents comprise computer programs containing instruction codes thatcontrol the operations of the computer and the network hardware to performcertain sequences of operations.

Infrastructure SoftwareInfrastructure and software include the following:

■ AD and middleware — AD toolsets support the planning, design,construction, quality and operation of applications. AIM is the systemsoftware or runtime infrastructure used to provide intra- andinterapplication communications.

■ Information management — This sector includes DBMSs used for datastorage and organization; BI analytic software products that store, access andanalyze complex data; and data warehouse mining and quality tools.

■ System and network management — System and network managementtools help manage the provisioning, capacity, performance and availabilityof IT systems. Security software is included to control and monitor access tointernal and external IT resources.

Applications Software■ Front office/CRM — The front-office/CRM software sector, part of the

enterprise software market, provides functionality to enterprises in foursegments: sales, marketing, call/contact center, and customer service andsupport.

■ Back office/ERP and supply chain — The back-office/ERP and supply chainsegment comprises applications for manufacturing and services, HRMSs andFMSs, and processes that encompass a trading partner community.

■ Collaborative and personal — The collaborative and personal market sectorcovers software products, tools and hosted services that supportcollaboration and knowledge management as a generic capability; it alsoincludes the balance of PC applications used by enterprises.

■ Engineering — This software sector includes AEC, EDA, embedded softwaretools, CAD/CAM/CAE and PDM.

IT ServicesThe services segment is defined as professional services and support services.

Professional ServicesProfessional services encompass all services purchased from external partiesfor planning through implementation of information systems. Examples ofsuch services include IT consulting, business consulting, development andintegration, IT management, and process management. The following servicesare included:

■ Consulting — Consulting services are advisory services that help companiesanalyze and improve the efficacy of business operations and technologystrategies. Consulting services include two subsegments: business and ITconsulting.



■ Development and integration — Development and integration servicescustomize or develop IT solutions, assets and processes and then integratethese solutions, assets and processes with existing infrastructure andprocesses. Development and integration services implement designsconceived by consultants. Development and integration services includethree subsegments: AD services, deployment services and integrationservices.

■ IT management — IT management services provide day-to-daymanagement and operation of IT assets and processes. As such, theyrepresent the core value components of IT outsourcing. Managementservices include three subsegments: applications management services, helpdesk management services and operations services.

■ Process management — Process management represents the core element ofa BPO service; namely, the transaction processing and business managementcomponents of BPO engagements. A typical BPO contract includes discreteproject-based IT services (such as consulting, development and integration),ongoing IT management services and process management. To avoiddouble counting of discrete IT services and IT management, GartnerDataquest reports only process management revenue and not total BPOrevenue in its core forecast. The process management component of BPOvaries from process to process but represents approximately 60 percent to70 percent of the BPO market.

Product SupportSupport services include all external services purchased for support andmaintenance of information systems such as hardware maintenance andsupport services as well as software maintenance and support services.Support services purchasing is typically a post-sales engagement that entailsservicing equipment and software (see "Worldwide IT Services MarketDefinitions Guide, 1Q03" for in-depth IT services definitions). Product supportservices include the following:

■ Hardware maintenance and support — These are preventive and remedialservices that physically repair or optimize hardware, including basicinstallation, contract maintenance and per-incident repair, either on-site or ata centralized repair depot. Hardware support also includes telephonetechnical troubleshooting and assistance with setup and all fee-basedhardware warranty upgrades. Exclusive of parts bundled into maintenancecontracts, sales of all parts used to repair high-tech equipment in carry-in,mail-in, or per-incident on-site delivery modes or purchased by internal staffto perform the repair are included. This segment includes only externalcustomer spending on these services.

■ Software maintenance and support — These services include revenuederived from long-term and pay-as-you-go support contracts. Technicalsupport contracts include telephone and online troubleshooting, installationassistance, and basic usability assistance. Software maintenance includesdelivery of product updates and enhancements excluding softwaremaintenance provided under support contracts, custom software updatesand major upgrades sold through nonservice channels. Software productsand technologies covered under this category include OSs; applicationssoftware; and systems and network management software, tools andutilities.

Internal ServicesInternal services refer to salaries and benefits paid to the IS staff of anenterprise. IS staff includes all company employees who plan, develop,implement and maintain information systems.



Telecom EquipmentTelecom equipment is the combination of infrastructure and enterpriseequipment as defined by the following:

■ Infrastructure equipment — Infrastructure equipment encompasses allforms of equipment (and some systems and even integrally related services)that combine to form the communications networks used by public serviceoperators worldwide. A famous example, though by no means the only one,is the PSTN: others include IP and other data networks as well as mobilenetworks. Infrastructure equipment is segmented into six major buildingblocks: switching, transport, access, signaling, support and mobileinfrastructure.

■ Enterprise equipment — Enterprise equipment includes telecommunicationsequipment and systems that are based in business locations and connectingeither with the PSTN, or to private data or voice networks.

■ Mobile handsets — Mobile handsets are terminal devices that provide voiceand data connectivity through a wireless link to a mobile access network.Mobile cellular phones, handheld portable phones, smart phones and pagersare included in this category. PDAs are not included unless wirelessconnectivity is built-in to the device.

Telecom ServicesTelecom services is the combination of fixed voice, fixed data and wholesale/carrier services as defined by the following:

■ Fixed voice services — This reflects retail voice service revenue for allservices that are sold as such to end users including the provision of localand long-distance services related to voice (calling charges, line rental/subscription and connection fees are included in this category), enhancedvoice services, data and fax transmission over the circuit-switched PSTN,and retail Voice over IP (VoIP) revenue paid for by the business end user ofthe service; no wholesale or carrier-to-carrier revenue is included.

■ Fixed data services — Fixed data services include all dedicated/private line,packet and circuit-switched access services (for example, frame relay,asynchronous transfer mode [ATM], IP, ISDN, DSL, multipoint,multichannel distribution service [MMDS], satellite and so on). Nodifferentiation is made between the type of traffic or application carried bythese services. All types of transmissions — nonvoice data, image, video,fax — and interactive services and even voice can be carried by theseservices regardless of whether the source format is analog or digital. Allrevenue reflects service provider annualized retail revenue paid for by thebusiness end user of the service; no wholesale or carrier-to-carrier revenue isincluded.

■ Mobile telecom services — Income from mobile telephone calls and mobiledata usage (Short Message Service [SMS] and mobile data access), from allmobile operators in that regional market. Income from mobile telephonecalling charges, mobile data access, SMS charges, line rental/subscriptionand connection fees are included in this category.

■ Wholesale/carrier services — Wholesale/carrier services reflect carrierrevenue from carrier-to-carrier service transactions. These transactionsrepresent a mix of end-user and intermediate IT transactions, whose precisecomposition cannot be readily determined at this point. Because of this, theassociated revenue is currently not included in reported end-user telecomservices spending to avoid double counting.


Chapter 7Worldwide Geographic Regional Definitions

The following regional hierarchy and definitions are used for GartnerDataquest's IT services geographic segmentation.

Asia/PacificThe Asia/Pacific region includes Australia, China, Hong Kong, India,Indonesia, New Zealand, South Korea, Malaysia, Singapore, Thailand andTaiwan.

Rest of Asia/PacificThe Rest of Asia/Pacific region includes American Samoa, Ashmore andCartier Islands, Baker Island, Bangladesh, Bhutan, Bouvet Island, Brunei,Cambodia, Christmas Island, Cocos (Keeling) Islands, Cook Islands, Coral SeaIslands, Federated States of Micronesia, Fiji, French Polynesia, Guam, HowlandIsland, Jarvis Island, Johnston Atoll, Kingman Reef, Kiribati, Laos, Macau,Maldives, Marshall Islands, Midway Islands, Mongolia, Myanmar (Burma),Nauru, Nepal, New Caledonia, Niue, Norfolk Island, Northern MarianaIslands, North Korea, Pakistan, Palau, Palmyra Atoll, Papua New Guinea,Paracel Islands, Philippines, Pitcairn Islands, Solomon Islands, Spratly Islands,Sri Lanka, Tokelau, Tonga, Tuvalu, Vanuatu, Vietnam, Wake Island, Wallis andFutuna, and Western Samoa.

Western EuropeThe Western Europe region consists of Austria, Belgium, Denmark, Finland,France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain,Sweden, Switzerland and the United Kingdom.

Rest of Western EuropeThe rest of Western Europe region includes Andorra, Cyprus, Faroe Islands,Gibraltar, Greenland, Guernsey, Iceland, Isle of Man, Jersey, Liechtenstein,Luxembourg, Malta, Monaco, San Marino and Svalbard.

Eastern EuropeGartner Dataquest IT services research does not cover specific countries inEastern Europe. The Eastern Europe region consists of Albania, Armenia,Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, CzechRepublic, Estonia, Georgia, Hungary, Kazakhstan, Kyrgyzstan, Latvia,Lithuania, Macedonia, Moldova, Poland, Romania, Russia, Slovakia, Slovenia,Tajikistan, Turkmenistan, Ukraine, Uzbekistan, and Yugoslavia (Serbia andMontenegro).

JapanJapan is a single-country region.



Latin AmericaGartner Dataquest IT services research does not cover specific countries inLatin America. The Latin America region consists of Anguilla, Antigua andBarbuda, Argentina, Aruba, Bahamas, Barbados, Belize, Bermuda, Bolivia,Brazil, Cayman Islands, Chile, Clipperton Island, Colombia, Costa Rica, Cuba,Dominica, Dominican Republic, Ecuador, El Salvador, Falkland Islands (IslasMalvinas), French Guiana, Grenada, Guadeloupe, Guatemala, Guyana, Haiti,Honduras, Jamaica, Martinique, Mexico, Montserrat, Navassa Island,Netherlands Antilles, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, SaintKitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname,Tortola (British Virgin Islands), Trinidad and Tobago, Turks and CaicosIslands, Uruguay, Venezuela, and Virgin Islands (St. John, St. Croix andSt. Thomas).

Middle East and AfricaGartner Dataquest research does not cover specific countries in the Middle Eastand Africa. The Middle East and Africa region includes Afghanistan, Algeria,Angola, Bahrain, Bassas da India, Benin, Botswana, Burkina Faso, Burundi,Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo,Cote d'Ivoire, Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, EuropaIsland, Gabon, Gambia, Ghana, Glorioso Islands, Guinea, Guinea-Bissau, Iran,Iraq, Israel, Jordan, Juan de Nova Island, Kenya, Kuwait, Lebanon, Lesotho,Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mayotte,Morocco, Mozambique, Namibia, Niger, Nigeria, Oman, Qatar, Reunion,Rwanda, Saint Helena, Sao Tome and Principe, Saudi Arabia, Senegal,Seychelles, Sierra Leone, Somalia, South Africa, Sudan, Swaziland, Syria,Tanzania, Togo, Tromelin Island, Tunisia, Turkey, Uganda, United ArabEmirates, Western Sahara, Yemen, Zaire, Zambia, and Zimbabwe.

North AmericaThe North America region consists of the United States and Canada.


Chapter 8Research Metrics

The following describes the research metrics Gartner Dataquest uses forreporting market revenue, market size and market share:

■ Compound annual growth rate (CAGR) — The annualized rate of revenue orunit shipment growth between two given years, assuming growth takesplace at an exponentially compounded rate. The CAGR between years X andZ, where Z - X = N is the number of years between the two given years, is cal-culated as follows:

CAGR Year X to Year Z = [(Value in Year Z/Value in Year X) ^ (1/N)-1]

For example, the CAGR for 2001 to 2006 is calculated as follows:

CAGR 2001 to 2006 = [(Value in 2006/Value in 2001) ^ (1/5)-1]

■ End user — The final user of a product or the final purchaser of maintenanceor nonmaintenance service for the IT products or technology. The finalpurchaser may or may not be the actual end user, but the outflow of theproduct stops at the end user.

■ Vendor — A vendor is the last entity in the chain that brands a product andsells it either directly to end users or through a channel. A vendor maydesign and manufacture its own products, assemble complete systems fromcomponents produced by others, or procure products from an OEM orcontract manufacturer. A vendor may also provide services — maintenanceor nonmaintenance — for its own products or for other vendors' productsand may also provide services for IT technologies.

■ Revenue — The gross sales generated by a vendor, measured in currency

■ Service contract — A purchase of maintenance or support services for aproduct. Examples are the annual purchase of maintenance for hardwarerepair, or an upgrade of warranty or for optional coverage.

■ Service provider — A company that does not manufacture products. Thecompany provides a Gartner Dataquest IT Services-defined service.




Chapter 9Exchange Rates

When data denominated in foreign currency is collected, Gartner Dataquestuses the average currency exchange rate for the relevant time period to expressthe data in U.S. dollars. The average exchange rate for a given quarter iscalculated by summing the exchange rates for the three months of the quarterand dividing the sum by three. Similarly, the average exchange rate for a year iscalculated by summing the exchange rates for the 12 months of the year anddividing the sum by 12.

Our historical market sizing and market share data is evaluated on a calendaryear or calendar-quarter basis. When converting a company's local currencysales into U.S. dollars, or vice versa, it is important to use the 2003 exchangerates provided by Gartner Dataquest (see Table 9-1). This will preventinconsistencies in the conversion of offshore sales between each company.

Table 9-1Prevailing Quarterly Exchange Rates (Foreign Currency per U.S. Dollar)

Final1Q03

Final2Q03

Projected3Q03

Projected4Q03

North America

Canada (Dollar) 1.51 1.40 1.35 1.35

Latin America

Argentina (Peso) 3.18 2.85 2.81 2.81

Brazil (Real) 3.50 2.98 2.89 2.89

Chile (Peso) 737.21 709.44 707.95 707.95

Colombia (Peso) 2,942.50 2,868.24 2,825.12 2,825.12

Mexico (Peso) 10.82 10.45 10.50 10.50

Peru (New Sole) 3.49 3.47 3.48 3.48

Venezuela (Bolivar) 1,683.55 1,600.00 1,600.00 1,600.00

Western Europe

Austria (Schilling) N/A N/A N/A N/A

Belgium (Franc) N/A N/A N/A N/A

Denmark (Krone) 6.92 6.54 6.36 6.36

Economic and Monetary Union (Euro) 0.93 0.88 0.86 0.86

Finland (Markka) N/A N/A N/A N/A

France (Franc) N/A N/A N/A N/A

Germany (Mark) N/A N/A N/A N/A

Greece (Drachma) N/A N/A N/A N/A

Iceland (Krona) 78.42 74.60 74.03 74.03

Ireland (Punt) N/A N/A N/A N/A

Italy (Lira) N/A N/A N/A N/A

Netherlands (Guilder) N/A N/A N/A N/A

Norway (Krone) 7.06 7.01 7.01 7.01

Portugal (Escudo) N/A N/A N/A N/A

Spain (Peseta) N/A N/A N/A N/A

Sweden (Krona) 8.55 8.05 7.81 7.81

Switzerland (Franc) 1.37 1.34 1.32 1.32

United Kingdom (Pound) 0.62 0.62 0.60 0.60



Central and Eastern Europe

Bulgaria (Lev) 1.82 1.72 1.67 1.67

Czech Republic (Koruna) 29.46 27.73 26.89 26.89

Hungary (Forint) 227.04 220.86 224.21 224.21

Poland (Zloty) 3.90 3.83 3.80 3.80

Romania (Lev) 33,101.65 32,814.81 32,529.60 32,529.60

Russia (Ruble) 31.65 30.86 30.47 30.47

Slovakia (Koruna) 38.92 36.32 35.57 35.57

Ukraine (Hryvna) 5.51 N/A N/A N/A

Japan

Japan (Yen) 118.95 118.53 118.33 118.33

Asia/Pacific

Australia (Dollar) 1.69 1.56 1.50 1.50

China (Yuan) 8.28 8.28 8.28 8.28

Hong Kong (Dollar) 7.80 7.80 7.80 7.80

India (Rupee) 47.80 47.07 46.70 46.70

Indonesia (Rupiah) 8,900.65 8,483.86 8,224.26 8,224.26

Malaysia (Ringgit) 3.80 3.80 3.80 3.80

New Zealand (Dollar) 1.82 1.76 1.72 1.72

Philippines (Peso) 54.09 52.94 53.43 53.43

Singapore (Dollar) 1.75 1.75 1.74 1.74

South Korea (Won) 1,201.34 1,208.82 1,194.14 1,194.14

Sri Lanka (Rupee) 96.88 97.16 97.24 97.24

Taiwan (Dollar) 34.68 34.72 34.63 34.63

Thailand (Baht) 42.82 42.27 41.68 41.68

Rest of World

Egypt (Pound) 5.29 5.92 5.99 5.99

Israel (New Shekel) 4.83 4.49 4.38 4.38

South Africa (Rand) 8.34 7.73 7.86 7.86

Turkey (Lira) 1,657,561.94 1,514,754.46 1,424,993.90 1,424,993.90

Note: Effective 1 January, 2002, euro became the common currency of Austria, Belgium, Finland, France, Germany, Greece, Ireland,Italy, Netherlands, Portugal and Spain. Effective May 2003, Ukranian Hrynva exchange rates no longer available.Source: Gartner Dataquest (July 2003)

Table 9-1 (Continued)Prevailing Quarterly Exchange Rates (Foreign Currency per U.S. Dollar)

Final1Q03

Final2Q03

Projected3Q03

Projected4Q03


Appendix AGlossary of Terms

Table A-1 lists abbreviations and acronyms used in this document.

Table A-1Report Glossary

Acronym/Abbreviation Definition

2-D two-dimensional

3-D three-dimensional

ACH automated clearinghouse

AD applications development

ADSL asynchronous digital subscriber line

AEC architectural, engineering and construction

AIM application integration and middleware

ATM asynchronous transfer mode

BI business intelligence

BPO business process outsourcing

CAD computer-aided design

CAE computer-aided engineering

CAGR compound annual growth rate

CAM computer-aided manufacturing

CGI Common Gateway Interface

CISC complex instruction set computer

COBRA Consolidated Omnibus Budget Reconciliation Act

CPE customer premises equipment

CRM customer relationship management

CSU channel service unit

DBMS database management system

DSU data service unit

EDI electronic data interchange

EDS electronic design automation

EFT electronic funds transfer

EH&S environmental health and safety

EPIC Explicitly Parallel Instruction Computing

ERP enterprise resource planning

ESP external service provider

ESRM Enterprise Storage Resource Management

FC Fibre Channel

FMS financial management system

FTP File Transfer Protocol

GUI graphical user interface

HDD hard disk drive

HDSL high-bit-rate digital subscriber line

HRMS human resource management system

I/O input/output

IBA InfiniBand Architecture

iSCSI Small Computer Systems Interface over IP

ISIC International Standard Industry Code

ISO International Organization for Standardization



IVR interactive voice response

LED light-emitting diode

MMDS multipoint, multichannel distribution system

MSB midsize business

MVS multiple virtual storage

NA not applicable

N/A not available

NAICS North America Industry Code and Standards

NIC network interface card

OLAP Online Analytical Processing

PBX private branch exchange

PDM product data management

PSTN public switched telephone network

RAID redundant array of independent disks

RISC reduced instruction set computer

SAN storage area network

SCM supply chain management

SDH Synchronous Digital Hierarchy

SIC Standard Industry Code

SMB small and midsize business

SMP symmetric multiprocessing

SMS Short Message Service

SOHO small office/home office

VoIP Voice over IP

VPN virtual private network


Table A-1 (Continued)Report Glossary

Acronym/Abbreviation Definition

Documents

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