Annex Bulletin 2006-16                               April 24, 2006

Excerpts from CONFIDENTIAL client edition

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INDUSTRY TRENDS

Updated 4/25/06, 8:30AM PDT, adds Summary

Annex Research 2006 Global IT Services Octathlon

  

Accenture Wins “Gold” Again

HP Gets the “Silver;” IBM the "Bronze"; Top 7 Face "The Growth Problem"

SCOTTSDALE, Apr 24 - Accenture won the “gold” in our 2006 annual global IT services Octathlon for a second year in a row, its fifth outright title to go with two ties for the "gold" in the last 11 years.   Hewlett Packard Services (HPS) and IBM Global Services (IGS) got the “silver" and the "bronze" respectively.  This year, however, Accenture's margin of victory was narrower (13 vs. 12 points for HPS and eight for IGS).   

[snip]

Just to recap quickly for our new readers the IT Services Octathlon scoring… The overall medal standings are determined by awarding three points for a “gold,” two points for a “silver,” and one point for a “bronze” in each of the eight competitions of the top global IT services vendors.

The eight categories are:

1. Revenue Growth – current year

2.                        "           "            …and 5-year

3. Market Share Gain/Loss

4. Net Margin

5. Gross Margin

6. Frugality

7. Sales Productivity

8. New Contract Sales  

[snip]

1.-2. Revenue Growth (2 Medals)

The “gold” medal for the best revenue growth in 2005 went to HPS (up 12.3% over 2004).  Accenture won the “silver” with a 11.5% jump, while CSC earned the “bronze” with a 4% increase.  Meanwhile, two the Top 7 competitors experienced revenue declines last year (EDS and Fujitsu, the latter mostly due to foreign currency translations - the weakness of the yen against the U.S. dollar).

[snip]

3. Market Share (1 Medal)

HP, Accenture and CSC were the market share gainers among the Top 7 in a year that did not see much movement in this competition category.  HP and Accenture gained 1.1 and 1.0 points respectively, while CSC added 0.3 of a point to its worldwide total.  EDS and Fujitsu lost market share, dropping 0.5 and 1.7 points respectively.

[snip]

4.-5. Profitability (2 Medals)

Accenture again won easily the gross margin “gold,” followed by IGS and Capgemini, which claimed the “silver” and the “bronze” respectively.  All three companies also won the profitability medals last year.

[snip]

6. Frugality (1 Medal)

Just as Accenture seems to be pre-subscribed to profitability medals, EDS has been a perennial winner of the frugality competitions.  One of the most beleaguered competitors in the last two years, EDS still continued its unfettered grip on the “gold” for the lowest operating expenses.  At 9.2% of revenues (down from 9.8% the year before), EDS’ 2005 operating expenses were by far the lowest among the Top 7 competitors.  

7. Sales Productivity (1 Medal)

Fujitsu again won its first and the only “gold” in the sales productivity category (revenue per capita), while the “silver” and the “bronze” went to IGS and HPS respectively.  It was the same lineup of medal winners as in last year's Octathlon.  The aggregate average sales productivity of the Top 7 competitors declined 4% in 2005.

[snip]

8. New Contract Sales (1 Medal)

EDS won the "gold" in new contract sales in 2005 with a 38% improvement over the dismal 2004 results ($20.5 billion vs. $14.9 billion).   Accenture got the "silver" with a 17% surge, while IGS earned a "bronze" with a 9% increase ($47.1 billion vs. $43.1 billion).

[snip]

Summary: The Growth Problem

Most of the largest global IT services companies suffer from the same ailment.  It's called the growth problem.  And it's a chronic condition.  The five-year annual growth rates have dropped from 17% to 8%.  And things are getting progressively worse.

[snip] 

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Volume XXII, Annex Newsflash 2006-16
April 24, 2006

Bob Djurdjevic, Editor
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