Worldwide IT Services Market Definitions Guide, 2Q03. Gartner Dataquest Guide

Transcription

1 Worldwide IT Services Market Definitions Guide, 2Q03 Gartner Dataquest Guide Publication Date: 6 August 2003

2 GARTNER WORLDWIDE HEADQUARTERS NORTH AMERICA Corporate Headquarters 56 Top Gallant Road Stamford, CT U.S.A. Tel: Fax: West Coast Headquarters 251 River Oaks Parkway San Jose, CA U.S.A. Tel: Fax: Latin America Headquarters Gartner do Brasil Av. Nações Unidas, o andar - World Trade Center CEP Sao Paulo SP Brasil Tel: Fax: EUROPE European Headquarters Tamesis The Glanty Egham Surrey, TW20 9AW United Kingdom Tel: Fax: ASIA/PACIFIC Asia/Pacific Headquarters Level 7 40 Miller St. North Sydney, NSW 2060 Australia Tel: Fax: JAPAN Japan Headquarters Aobadai Hills 6F 7-7, Aobadai, 4-chome Meguro-ku Tokyo Japan Tel: Fax: Gartner, Inc. and/or its Affiliates. All Rights Reserved.

3 Worldwide IT Services Market Definitions Guide, 2Q03 Gartner Dataquest Guide Publication Date: 6 August 2003

4 Authors Ellie Babaie Robert De Souza Jacqueline Heng Rika Narisawa This document has been published to the following Marketplace codes: ITSV-WW-GU-0007 For More Information... In North America and Latin America: In Europe, the Middle East and Africa: In Asia/Pacific: In Japan: Worldwide via gartner.com: Entire contents 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice

5 Table of Contents Page 1. Market Statistics Overview and Methodology... 1 Accessing Statistics Databases... 1 Market Share Methodology... 1 Forecasting Methodology Overview... 2 Forecasting Goals Overview of the IT Services Segmentation... 5 Core Segmentation... 5 Environmental Segmentation... 5 Method-of-Purchase Segmentation Core IT Services' Segmentation Definitions... 7 IT Services Definitions... 7 Product Support Services... 7 Hardware Maintenance and Support Services... 7 Software Maintenance and Support Services Professional Services Consulting Development and Integration IT Management Process Management IT Services' Environmental Definitions Method-of-Purchase Definitions Outsourcing Business Process Outsourcing Vertical Market Definitions Vertical Market Forecast Components Definition of IT Market Components Hardware Applications Software IT Services Internal Services Telecom Equipment Telecom Services Worldwide Geographic Regional Definitions Asia/Pacific Rest of Asia/Pacific Western Europe Rest of Western Europe Eastern Europe Japan Latin America Middle East and Africa North America Research Metrics Exchange Rates Appendix A Glossary of Terms Gartner, Inc. and/or its Affiliates. All Rights Reserved. iii

6 iv Worldwide IT Services Market Definitions Guide, 2Q03 List of Tables Table Page 2-1 Core IT Services Market Segmentation Hardware Segmentation for Hardware Maintenance and Support Service Software Segmentation for Software Maintenance and Support Service Professional Services Vertical Market Industrial Codes Company Size Segments Prevailing Quarterly Exchange Rates A-1 Report Glossary... 37

7 Chapter 1 Market Statistics Overview and Methodology Accessing Statistics Databases Market Share Methodology Gartner Dataquest publishes comprehensive market share and forecast statistics on the IT services market. These statistics are analyzed in documents on gartner.com and are available to IT Services Cluster clients as MarketView databases at marketview.gartner.com. MarketView databases permit online data queries and Web-based data manipulation, using either unique or pre-defined reports. In addition, each MarketView database can be downloaded from marketview.gartner.com. Each download file contains two versions of the database: one prepackaged as an Excel pivot table, and one as a.cub file. The pivot table is based on a simple flat file and includes definitions. The.CUB file, an industry standard version of an Online Analytical Processing (OLAP) multidimensional database, displays the hierarchical structure of the IT services market model. It can be accessed by a variety of business intelligence applications, including Excel, ProClarity and Cognos. Market statistics analysts in IT services are happy to help clients access statistics, via client inquiry. MarketView databases are published to Gartner Dataquest clusters in the following categories: Market share Market share data includes vendor revenue and total market size by major service line, geography and environment presented for two historical years. Service line forecasts The data includes end-user spending by service subsegments, geography and environment presented both historically and in afive-yearforecast. Vertical market forecasts The data includes end-user spending for vertical markets and geography for hardware, software, telecommunications equipment, telecommunications services, major IT services segments and internal spending presented both historically and in a five-year forecast. Outsourcing forecast The data includes end-user spending by major service segment and geography for the business process outsourcing (BPO) by process, IT outsourcing, and the discrete method of purchase, presented for history and five-year forecast. Each year, we publish both preliminary and final market share statistics on approximately 500 IT services vendors by service line, geography, vertical market and environment. Preliminary market share statistics are developed using both high-level secondary research and modeling, to provide timely estimates of the previous year's results. Sources of data used for preliminary market 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 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 1

8 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 services revenue by the market size. While statistics on individual vendors are based on revenue,totalmarketsizeisanestimateofend-userspending.itservices market sizing is developed by beginning with vendor revenue data for the vendors that are tracked, adding estimated revenue for remaining vendors not tracked, and subtracting an estimate for subcontracting. These estimates are informed by Gartner Dataquest's established extensive statistics on current and past computing and telecommunications spending, end-user survey data, economic and demographic statistics, and analyst expertise. This process allows for vendor revenue and end-user spending to be reconciled for consistency. Information from a demand-side perspective ensures that we have neither overestimated nor underestimated the available budgets from end users, and supply-side data grounds our end-user spending in the reality of the types and quantity of services that have been delivered by services companies. Final market share and market sizing statistics include additional direct surveys and interviews of approximately 500 major IT services vendors in Asia/Pacific, Europe, Japan, North America and Latin America, seeking estimates on the distribution of annual IT services revenue. The information gathered from this survey enables Gartner Dataquest to maintain its database of vendor revenue data for each market segment. The categories for which IT services revenue are reported are comprehensively defined for the purpose of providing clarity and guidance to survey participants as well as those who use Gartner Dataquest's IT services market data. These definitions are revised, altered or expanded every quarter to reflect changes in the IT services marketplace. Gartner Dataquest believes its market statistics data is the most accurate and meaningful available. Despite the care taken in gathering, analyzing and categorizing the data, careful attention must be paid to the definitions and assumptions. Various companies, government agencies and trade associations may use slightly different definitions of service categories and regional groupings, or they may include different companies in their summaries. These differences should be kept in mind when making comparisons between data and numbers provided by Gartner Dataquest and those provided by other research organizations. Forecasting Methodology Overview Forecasting provides a structured and logically rigorous setting in which to clarify expectations about the future, and forecasts help reduce business risk by aiding executives in planning strategy and tactics based on likely events and trends. Our objective is to provide clients with forecasts that are useful, credible andasaccurateaspossible. Fundamental to the way Gartner Dataquest conducts its research is an underlying philosophy that the best data and analysis come from a well-balanced program. This program includes the following: Balance between primary and secondary collection techniques Balance between supply-side and demand-side analysis

9 Market Statistics Overview and Methodology 3 Figure 1-1 IT Services Forecast Methodology Balance between focused industry-specific research and coordinated "big picture" analysis aided by integration of data from more than 25 separate high-technology industries that Gartner Dataquest covers Balance between the perspectives of experienced industry professionals and rigorous, disciplined techniques of seasoned market researchers Gartner Dataquest analyzes a full range of influences that can impinge on a forecast, including general macroeconomic conditions, total available market, intensity of competition, the rate of innovation among competitors and suppliers, leadership talent, potential changes in current business models, changes in production or delivery models, access to capital, buyer behavior and demographics, and influence of regulatory and standards bodies. Analysts also look at interest rate fluctuations, currency fluctuations, business expectations and capital-spending plans. In the geopolitical arena, the group looks at trade issues, political stability or the lack thereof, and tariffs and nontariff barriers. In addition, analysts consider accuracy of earlier forecasts. The IT services forecast is developed by determining assumptions, drivers and inhibitors in the market, using a proprietary collaborative, global, real-time forecast system. An overview of this process is illustrated in Figure 1-1. We use a mix of quantitative statistical and qualitative judgmental methods to generate forecasts. Statistical techniques are used in the early parts of our process to anchor our preliminary forecasts in historical fact. Expert judgment techniques are then used to shape the final forecast according to analyst consensus. Internal Sources Vendor-/supply-side research User-/demand-side research Historical data IT market data: semiconductor components, hardware, software and telecom Technology trends and analysis IT advisory role Scenario building Expert judgment Peer review Real-Time Collaborative Forecasting System MarketViews on gartner.com External Sources Publicly available information Quarterly vendor results Regular vendor briefings Economic and demographic data Industry data Business and financial indicators Secondary research Assumptions Source: Gartner Dataquest (July 2003)

10 4 Worldwide IT Services Market Definitions Guide, 2Q03 Assumptions are tested against different points of view. An integral part of this process involves comparing preliminary forecasts to related forecasts that either flow into or flow from them. For IT services, this means carefully examining and taking into account related software, computer and telecommunications forecasts. It also means the ranks of those involved in the forecast process extend beyond Gartner Dataquest's global staff of IT services analysts. The peer review of assumptions strengthens the resulting forecast, because the result must be seen to be valid both within the context of individual market segments but also for the total market. This methodology provides an iterative approach to a final forecast in which successive preliminary forecasts are reviewed, critiqued and revised by all those involved in the forecast process. Gartner Dataquest believes that a sound forecasting process incorporates both art and science into a logical and coherent series of steps that, if conducted in a rigorous and organized fashion, will ensure forecasting effectiveness, reliability and accuracy and will prove a valuable tool for developing sound market strategies. Forecasting Goals We aim to provide clients with forecasts that are useful, credible and as accurateaspossible.becauseitisimpossibletoalwaysbecorrect,itis important to provide clients with details of the assumptions that built the forecast. Gartner Dataquest realizes that clients evaluate the forecast's credibility by evaluating both the historical accuracy and the quality of written forecast assumptions. This does not imply that a conservative approach is called for; where we fail to forecast a completely new market, we have failed to inform the client of an opportunity. Gartner Dataquest uses tools and processes that maximize our overall presence in the market research industry by sharing processes and time frames, so that a unified, coherent picture of the IT market is built. For several years the process of developing IT market forecasts has been undergoing continued refinement at Gartner Dataquest. Today, the process draws on Gartner Dataquest's industry experts and client feedback to devise a forecast that is consistent internally and meets client expectations. The process assimilates vast amounts of both disparate and aggregated data that is molded intoaforecastthatisscrutinizedandscrubbedbymanyseasonedanalysts.the completion of a typical long-term forecast takes three to six weeks, depending on the service area, with several major steps. The amount of time and effort that goes into a forecast varies from period to period and also depends heavily on the technology area being forecast. Generally, forecasts produced after the release of annual data are the most time-consuming and require the most attention. Also, unexpected economic developments can also affect the complexity and duration of the forecasting process.

11 Chapter 2 Overview of the IT Services Segmentation Core Segmentation Environmental Segmentation Gartner Dataquest's IT services programs segment and forecast the market across several different dimensions. In this manner, the total marketplace can be viewed by readers in whichever manner most closely fits their view of the marketplace. These different dimensions are reviewed in detail below. The IT services market can be segmented by the type of skills that are employed to deliver the service. This has been the traditional means to segment this market space. This core segmentation includes both product support (formerly traditional) and professional services. Product support services are further segmented by either hardware or software product types. Table 2-1 details the components of the various services segments. Definitions for the core segments can be found in Chapter 3. Thecoreservicessegmentationcanbefurtherbrokendownbyenvironment. All services can be associated with the major platforms for which the work has been rendered. Gartner Dataquest's IT services group has identified three main environments: 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 segmented into LAN, WAN (networking services), corporate CPE and public network (telecommunication services). Please refer to Chapter 4 for environmental definitions. Method-of-Purchase Segmentation Another way to view the services market is by how services are delivered to and contracted by customers. Generally, customers contract services for either a project or for a specific type of service (discrete) or for a multiyear relationship that includes multiple service components and management of an IT asset, infrastructure, or business process (outsourced). Further definitions for methods of purchase can be found in Chapter 5. Method-of-purchase segmentation include the following: Discrete Outsourced IT outsourcing BPO 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 5

12 6 Worldwide IT Services Market Definitions Guide, 2Q03 Table 2-1 Core IT Services Market Segmentation Service Level 1 Service Level 2 Service Level 3 Service Level 4 Product Support Hardware maintenance and support Client computing hardware services Personal computer services Workstation services Document management hardware services Copier services Server printer services Enterprise computing hardware services Server appliance services Server hardware services Software maintenance and support Storage subsystem hardware services Telecom equipment support services Applications software services Infrastructure software services OS software 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 Source: Gartner Dataquest (July 2003) Other storage subsystem services RAID-based storage system services Enterprise equipment services Infrastructure equipment services Back-office/ERP and supply chain software services Collaborative and personal software services Engineering software services Front-office/CRM software services Applications development and middleware software services Information management software services Other infrastructure software services Storage management software services System and network software services Microsoft OS services Other OS services Unix OS services

13 Chapter 3 Core IT Services' Segmentation Definitions IT Services Definitions Product Support Services IT services refer to the application of business and technical expertise to enable organizations in the creation, management, optimization or access to information and business processes. Hardware Maintenance and Support Services These are preventive and remedial services that physically repair or optimize hardware, including basic installation, contract maintenance, and per-incident repair, both on-site or at a centralized repair depot. Hardware support also includes telephone technical troubleshooting and assistance for setup and all fee-based hardware warranty upgrades. Exclusive of parts bundled into maintenance contracts, 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 staff to perform the repair, are included. This segment includes only external customer spending on these services. Table 3-1 lists the different types of hardware covered in the hardware maintenance and support services. Table 3-1 Hardware 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 hardware services Copier services Server printer services Enterprise computing hardware services 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 Source: Gartner Dataquest (July 2003) Client Computing Hardware Services This segment includes PC services and workstation services. Personal Computers A PC is a general-purpose computer that is distinguished from other computers by its adherence to hardware and software compatibility. This compatibility drives high unit volumes of commoditylike products that do not require on-site technical support. High-performance features (such as networking, graphics and a virtual multiuser/multitasking OS) are normally optional and not integral system features. IBM/IBM-compatible and Macintosh PCs are two platforms in this product segment. A single-user PC's resident operating system is typically DOS, OS/2 or Mac OS. PCs have a performance ceiling that is lower in system compute performance, input/output (I/O) channel speed and disk speed than advanced workstations Gartner, Inc. and/or its Affiliates. All Rights Reserved. 7

14 8 Worldwide IT Services Market Definitions Guide, 2Q03 Normally, standard graphics are in the 760 x 1280-pixel range, and optional high-end graphics are limited compared with workstations. A PC system is a single unit, which includes a CPU, a monitor and a keyboard. Furthermore, PC shipment data does not include systems assembled from component parts purchased in electronic stores or other outlets. A high-performance computer is designed for either numerically intensive applications or commercial functions that require extensive and rapid computational capabilities. These systems include computing technologies such as vector, superscalar symmetric multiprocessing (SMP) and massively parallel processing. Massively parallel processing systems are defined as a system configured with 32 or more processors. Typically, these systems run in cool rooms (with or without raised floors) or environmentally controlled office habitats and require a dedicated support organization. Applications that lend themselves to the supercomputer platform include atmospheric simulation, pharmacological testing and nuclear development as well as very high-level decision support and online analysis. Workstation Workstations are typically based on high-end Intel or reduced instruction set computer (RISC) CPU architectures with high-performance graphics, OS and system architecture. In general, workstations must include integrated floating-point processing, integrated networking, a 32-bit or 64-bit multitasking OS, high-resolution two-dimensional (2-D) graphics capabilities (typically 1-megapixel display), as well as configurations that support high-performance three-dimensional (3-D) graphics functionality. The workstation market includes traditional Unix workstations, workstations running Windows NT or proprietary OSs, and other advanced OSs, such as NeXTSTEP and Solaris. Workstationsareclassifiedbytheprimarymarketforwhichtheyaredesigned. Workstations are further segmented into one of three categories: entry-level workstation, midrange workstation and superworkstation. Apple Power Macintosh systems are not considered workstations and are included in the PC classification. Document Management Hardware Services This segment includes copier and printer services. Copiers Copiers include both analog (optical technology) and digital (digital scanning and printing technology) copiers as follows: Analogcopiers Imagecaptureandtransferusingopticalor"lightlens" technology in which the image is flash-illuminated on the platen, then transferred to the photoconductor through a series of lenses and mirrors. The latent image is then transferred from the photoconductor to paper through the electrophotographic process. Digital copiers Image capture using digital scanning and image transfer using electronic impulse in which the image is scanned from the platen and digitized into electronic data. The electronic data is processed to enable the image to be transferred to the photoconductor. The electronic image data is then transferred to the photoconductor through the light impulses of a laser or light-emitting diode (LED) to "write" the image to the photoconductor material. The latent image is then transferred from the photoconductor to paper through the electrophotographic process, as with an analog copier.

15 Core IT Services' Segmentation Definitions 9 Printers A printer is the peripheral output device of a computer system for producing computer-generated images on paper using a number of different marking technologies. To be classified in this segmentation, the device needs to be capableofusingplainorcoatedpaperswithaminimumsizeofinternational Organization for Standardization (ISO) A4, U.S. size A (letter), or continuous forms with an 8-inch print width or greater, but excludes products that support paper widths above A2 or U.S. size C (17 x 22 inches). The definition also excludes other classes of application-specific printers, such as point-of-sale printers, video printers and dedicated photo printers. Enterprise Computing Hardware Services This segment includes server appliance services and server hardware services. Server Appliance A server appliance is a specialized network-based hardware device designed to perform a single or specialized set of server functions. It provides end users with a complete solution with combined hardware and software, has minimum OS presence and requires no per-seat network OS license. Client access is independent of any OS or proprietary protocol. In addition, the device is a "closed box" delivering extreme ease of installation, minimal maintenance and can be managed by the client via a Web browser. Server appliances consist of caching, multipurpose, Web, small business and others as follows: Caching appliances These appliances store locally the static content of the first requested Web page of a remote origin server so that the subsequent requests for the same page can be delivered to the local user on the same network at a much faster speed, reducing the redundant Internet traffic and saving bandwidth. This kind of deployment is the so-called "forward proxy mode." In a "reverse proxy mode," the caching appliance is placed in front of the original Web server to help deliver the static content of the Web server and serve as a buffer to protect the Web server from heavy hits. Midrange caching appliances are those that can support up to T1 (1.5 Mbps) data throughput. High-end caching appliances are those that can support T3 (43Mbps)orgreaterdatathroughput. Multifunction These products provide basic networking functions, such as shared Internet access with basic firewall, and file/print sharing. Some products also incorporate other functions such as e-commerce, remote access/virtual private network (VPN), proxy, collaboration, group scheduling and integrated voice mail and . Some have built-in WAN connection, while others don't. Examples in this category include Cobalt Network's Qube, IBM's Whistle InterJet, esoft's Team Internet and Encanto Networks' e.go. Web server appliances These server appliances integrate standard Web server software such as Apache, which is used in Web publishing and delivering HTTP Web content and provides support for Web applications with simple database access, custom scripting, Common Gateway Interface (CGI) and plug-in extension capabilities. Additional functions such as and File Transfer Protocol (FTP) server may also be found in Web server appliances. Examples of midrange Web server appliances include Cobalt Network's RaQ products and Dell's PowerApp.Web. Other applications These server appliances are typically single-function products that are no longer sold in large volumes. Existing applications include , Web serving and Web publishing. Examples in this category include Technaut's eserver.mail and eserver.publish and Intel's InBusiness station.

16 10 Worldwide IT Services Market Definitions Guide, 2Q03 Server Hardware Services This segment includes workstations that are single-user systems such as high-end, midrange and entry-level workstations. Workstations are typically high-end complex instruction set computer (CISC), Explicitly Parallel Instruction Computing (EPIC) or RISC-based CPU architectures with high-performance graphics, OS and system architecture. In general, workstations must include integrated floating-point processing, integrated networking, a 32-bit or 64-bit multitasking OS, as well as configurations that support high-resolution graphics capabilities and 3-D graphics functionality. The workstation market includes traditional Unix workstations including Linux and workstations running Windows NT/2000 or other advanced OSs. Gartner Dataquest classifies workstations by the primary market for which they are designed and thus bases its data collection on desktops branded as workstations. Systems shipped with Windows 95/98 are generally counted as PCs and not included in the workstation category and, because they are not branded as workstations, neither are Apple Macintosh desktops. Examples of IA-32-based workstations are IBM's IntelliStation family, the Compaq Evo Workstations, Dell Precision Workstations and HP Workstations. Note that the IA category refers to IA-compatible, x86 CPU-based workstations and covers a variety of chipset and processor designs not offered by Intel. Note also that the IPF and 64-bit extensions to CISC architecture such as AMD's Hammerarchitecture-based workstations will be listed under title IA-64. Entry-Level Workstation An entry-level workstation is a system with a typical base price between $2,000 and $5,000, usually priced less than $10,000 for a fully configured system. These systems are typically cost-reduced models targeted at price-sensitive end users. They mainly run 2-D graphics with some limited 3-D graphics capabilities that may be integrated on the system motherboard. Typically, entry-level workstations do not have the expandability of midrange workstations and cannot achieve the same levels of application performance or other capabilities available in more-expensive models. They typically come in uniprocessor configurations but are occasionally scalable to two CPUs. Most IA-32- compatible entry-level workstations are based on the Pentium as opposed to the Xeon family of processors. Examples of entry-level workstations include Dell Precision 340, HP Workstation x1100, IBM E-Pro, Compaq Evo Workstation W4000, SGI O2 and Sun Sunblade 100. Midrange Workstation The midrange classification is the traditional workstation configuration that is designed for the technical user who requires more power, better graphics and larger amounts of memory and storage. These are usually desktop systems that differ from the entry-level models in that they typically have higher performance, full-function 3-D graphics capabilities and offer more expandability. They are typically dual-processor scalable. Midrange systems usually have a starting price between $4,000 and $15,000. The list price of a fully configured model with the fastest processor options and top-of-the-line graphics subsystems can be as much as two to three times the price of a minimally configured system and higher than the entry point for a high-end workstation. Most IA-32-compatible midrange workstations are based on the Xeon family of processors. Examples of midrange workstations include Dell Precision 530, HP Workstation c series, IBM Z-Pro, Sun Sunblade 2000, Compaq Evo Workstation W8000 and SGI Octane.

17 Core IT Services' Segmentation Definitions 11 High-End Workstation The high-end workstation typically has the highest combination of CPU and graphics performance. It has the most expansion capability for adding memory and 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 with large data sets. The systems can be acquired and run by a single user but are sometimes deployed to support multiple users. Multiprocessing capabilities first appeared in this category, and typically they are the entry points for new advanced technology into the workstation market. Base prices for RISC high-end workstations can start as low as $20,000 for a minimally configured system and can go up to more than $200,000 for multi-cpu systems that are essentially graphics supercomputers capable of handling very large and complex data models. Examples of high-end workstations include the four-way HP Workstation j series, Sun's Ultra 80 and the SGI Onyx2 Reality family. Storage Subsystem Hardware Services This segment includes other storage subsystem services and redundant array of independent disks (RAID)-based storage system services. Tape Products This category includes all segments of tape drives used for computer storage. This forecast includes storage devices that are stand-alone only. Storage that is enclosed within a computer shipment is included in the computer systems segment. This methodology avoids double counting. Controllers and subsystems are also factored in. Redundant Array of Independent Disks This category includes the total of all external RAID. RAID is a set of disk drives (at least three) that I/O activity is managed from either host-based software or a controller. Telecom Equipment Support Services This segment includes enterprise equipment services and infrastructure equipment services. Enterprise Equipment Enterprise equipment comprises telecommunications equipment and systems that are based in consumer and business locations and that connect either with the public switched telephone network (PSTN) or to private data voice networks. Infrastructure Equipment Infrastructure equipment includes all forms of equipment (and some systems and even integrally related services) that combine to form the communications networks used by public service operators worldwide. A good example is the PSTN. 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.

18 12 Worldwide IT Services Market Definitions Guide, 2Q03 Software Maintenance and Support Services These services include revenue derived from long-term and pay-as-you-go support contracts. Technical support contracts include telephone and online troubleshooting, installation assistance, and basic usability assistance. Software maintenanceincludessupportcontractsandcustomsoftwareupdates. Software products and technologies covered under this category include OSs; application software; and systems and network management software, tools and utilities. Table 3-2 lists the different types of software covered in the software maintenance and support services. Table 3-2 Software 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 chain software services Collaborative and personal software services Engineering software services Front-office/CRM software services Infrastructure software services Applications development and middleware software services Information management software services 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 Source: Gartner Dataquest (July 2003) Applications Software This segment includes back-office, enterprise resource planning (ERP) and supply chain software services as well as collaborative and personal software services. It also covers engineering software and front-office/customer relationship management (CRM) software services. Back Office/ERP and Supply Chain The back-office/erp and supply chain sector comprises applications for manufacturing and services, human resource management systems (HRMSs) and financial management systems (FMSs), and processes that encompass a trading partner community. Collaborative and Personal The collaborative and personal market sector covers software products, tools and hosted services that support collaboration and knowledge management as a generic capability, and the balance of PC applications used by enterprises.

19 Core IT Services' Segmentation Definitions 13 Design and Engineering This software sector includes architectural, engineering and construction (AEC), electronic design automation (EDA), embedded software tools, computer-aided design/manufacturing/engineering (CAD/CAM/CAE), and product data management (PDM). Front Office/CRM The 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 Software This segment includes applications development (AD) and middleware software, information management software, other infrastructure software, storage management software, system and network software services. AD and Middleware AD toolsets support the planning, design, construction, quality and operation of applications. Application integration and middleware (AIM) is the system software or runtime infrastructure used to provide intra- and interapplication communications. Information Management This sector includes database management systems (DBMSs) used for data storage and organization, business intelligence (BI) analytic software products that store, access and analyze complex data, and data warehouse mining and quality tools. Other Infrastructure This includes embedded software tools, business intelligence and data warehousing tools, DBMS and security software. Storage Management Products in this segment provide basic data organization functions such as file systems, volume management and physical replication to ensure data integrity and availability by offering fast failure recovery and data redundancy. Network file systems, high-availability (such as clustering) software, and database replication and synchronization products are not included. Products used to sort data or those for file transfer are also not included. System and Network System and network management tools help manage the provisioning, capacity, performance and availability of IT systems, security software is included to control and monitor access to internal and external IT resources. OS Software GartnerDataquestdefinesanOSassoftwarethatmapslogicalconstructsto physical locations in the computer. The system is the program that lets a user access data by a file name without knowing where the file is physically located on the disk. The OS controls the computer's operations by managing disk, screen, file maintenance and printer activity while loading and running application programs. This segment includes Microsoft, Unix and other OSs. Microsoft Windows 16-Bit Microsoft's16-bitoperatingenvironment(Windows3.x)runsontopofDOS.It allows the display of several individual screens at one time and enables the user to switch between several windows. This encompasses all Windows 3.x products.

20 14 Worldwide IT Services Market Definitions Guide, 2Q03 Professional Services Table 3-3 Professional Services Microsoft Windows 32-Bit This includes Windows 9x and Windows NT Workstations. Windows 9x is Microsoft's 32-bit OS and graphical user interface (GUI) for desktop PCs, while Windows NT Workstation is an operating environment for workstations. Microsoft Windows NT Server and Windows 2000 Server These are Microsoft's 32-bit operating environments for servers and networks. Unix Originally developed at AT&T Bell Laboratories, Unix is a 32-bit, multitasking, multiuseros,whichisportableandcanbefoundonmostciscandrisc CPUs, including Intel Pentium and 80xxx, Motorola 68xxx and Sun SPARC. Other OSs Other OSs includes Multiple Virtual Storage (MVS), Virtual Machine (VM), and OS/390 and z/os, which are IBM's OSs for System 390 mainframe and e-server zseries computers. It also includes Linux, which is an open-source version of Unix and Java. Although it is not a truly complete OS, the Java platform provides much of the same functionality and is the focus of increasing development activity. Table 3-3 shows the segmentation covered under professional 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 Source: Gartner Dataquest (July 2003) Consulting Consulting services are advisory services to help companies analyze and improve the efficacy of business operations and technology strategies. Consulting services include two subsegments; business and IT consulting.

21 Core IT Services' Segmentation Definitions 15 Business Consulting Business consulting services are advisory services that influence the adoption of IT. These business consulting services are intended to improve business operational efficiencies, transform established businesses or create new businesses via information technology. Business consulting activities include corporate strategy planning, review of business plans, business process analysis or re-engineering, and business requirements analysis, as well as change management and organizational consulting pertaining to the adoption of IT solutions. Some service examples include product/market portfolio consulting, corporate development, R&D, sales and marketing consulting, operations strategy, organization management and reorganization, operational effectiveness management, strategic sourcing, and supply chain management. Business consulting services typically preface the design of IT solutions. IT Consulting IT consulting services are advisory services that help clients assess different technology strategies and, in doing so, align their technology strategy with their business or process strategy. These services support customers' IT initiatives by providing strategic, architectural, operational and implementation planning. Strategic planning includes advisory services that help clients assess their information technology needs and formulate system implementation plans. Architecture planning includes advisory services that combine strategic plans and knowledge of emerging technologies to create the logical design of the system and the supporting infrastructure to meet customer requirements. Operational assessment/benchmarking includes services that assess the operating efficiency and capacity of a client's IT environment. Implementation planning includes services aimed at advising customers on the rollout and testing of new solutions deployment. Development and Integration Development and integration services customize or develop IT solutions, assets and processes and then integrate these solutions, assets and processes with established infrastructure and processes. Development and integration services implement designs conceived by consultants. Development and integration services include three subsegments: AD services, integration services and deployment services. Applications Development AD services create new functionality for custom-developed or packaged applications. AD services frequently serve to integrate or link internal or external business processes. These services may include conversion applications to run on different platforms or architectures. Deployment Deployment services support the implementation and rollout of new applications or infrastructure. Activities may include hardware or software procurement, configuration, tuning, staging, installation, and interoperability testing. Integration Integration services are detailed design, implementation and management services that link applications (custom or prepackaged) to each other or with the existing or planned IT infrastructure. Specific activities might include project planning, project management, detailed design or implementation of application programming interfaces.

22 16 Worldwide IT Services Market Definitions Guide, 2Q03 IT Management IT management services provide day-to-day management and operation of IT assets and processes. As such, they represent the core value components of IT outsourcing. Management services include three subsegments, operational services, applications management services, and help desk management services. Applications Management Applications management provides a wide variety of services, processes and methodologies for maintaining, enhancing and managing both custom and packaged software applications. Help Desk Management These services provide centralized information and support management service to handle a company's internal queries and operational problems about IT-related processes, policies, systems and usage. Services include hardware and software support, logging of problems, dispatch of service technicians or parts, training coordination, and other IT-related issues. Operations Services Theseserviceshandlethetransferofallorpartoftheday-to-daysystem management responsibility for a customer's IT infrastructure (host/data center, client/desktop or connectivity/network) and, in some cases, the transfer of ownership of the technology or personnel assets to an outside vendor. Services may include systems operation or support, administration, security, performance monitoring, technical diagnostics/troubleshooting, configuration management, system repair management, and generation of management reports. Also included are services to manage and implement business continuation processes. Also included is the management of technology assets. Process Management Process management represents the core element of a BPO service, namely, the transaction processing and business management components of BPO engagements. A typical BPO contract includes discrete project-based IT services (such as consulting, development and integration), ongoing IT management services and process management. To avoid double counting of discrete IT services and IT management, Gartner Dataquest reports only process management revenue and not total BPO revenue in its core forecast. The process management component of BPO varies from process to process but represents approximately 60 percent to 70 percent of the BPO market. BPO Processes TheBPOprocessesareasfollows: Enterprise services, which include: HR These processes are payroll, online benefit enrollment, health and welfare benefits administration, defined contribution program administration, flexible spending account, administration, Consolidated Omnibus Budget Reconciliation Act (COBRA) administration, recruiting, background checking, education and training, contingent workforce management and other HR processes ("expat" administration, organizational development, compensation planning and strategy).

23 Core IT Services' Segmentation Definitions 17 Finance and accounting This category consists of accounts payable (including travel and expenses), accounts receivable, billing, general ledger, tax management, treasury and cash management, management accounting, electronic payments (such as credit card or automated clearinghouse [ACH]), reconciliation of "suspense" account balances, yield analysis, preparing asset schedules, risk analytics, and other finance and accounting. Payment services These services encompass paper checks, check electronification, electronic data interchange (EDI), business and corporate credit cards, letters or lines of credit, ACH, electronic invoice and payment, insurance (such as excess value, credit, flexible parcel or collect on delivery secure). Administration Thiscategoryofprocessesincludesdocument management, asset management, real estate management and other administration. Supply management, which includes: Buying processes Buying processes include both direct procurement and indirect procurement. Storingprocesses Thisprocesscoverswarehouse/inventory management. Moving processes These processes include logistics and transportation (both domestic and international), distribution, supply chain planning and other SCM processes. Demand management processes are as follows: Customer selection This process consists of market segmentation/ prospect data access and analysis, campaign design and communications planning. Customer acquisition Customer acquisition includes lead management/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 data analytics, upsell/cross-sell, other sales, marketing and customer care processes. 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 and processing), vehicle financing (vehicle leasing and lending), cash management, 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 and payment, check processing and imaging, electronic checks, exception processing and automation, trade services (as necessary: cargo and business insurance), Internet banking, Internet lending, trust (as necessary: retirement and custodial plan trust and administration services), investments and trading, investment portfolio management (insurance), pension administration (insurance), claims processing (insurance), primary business applications (insurance), policy underwriting (insurance), policy servicing and administration (insurance), actuarial (insurance), all data processing (insurance) and data warehousing (insurance).