Worldwide Internet revenues spiked to 71 percent in 1998 to reach a total of $7.8 billion, according to a new report from International Data Corp.
These revenues will earn a compound annual growth rate of nearly 60 percent and pass $78 billion by 2003.
According to IDC, the U.S. spends more on Internet services than any other country. In 1998, its $4.6 billion in spending accounted for more than half of worldwide total. IDC expects 1999 and 2000 to be critical years for the U.S. market.
The U.S. is expected to maintain its status as the largest market for Internet services, and western Europe will have the second largest market with a five-year growth rate of 67.1 percent, according to the IDC forecast.
“In addition to becoming more prominent, Internet projects are becoming more sophisticated and
complex, demanding different skills… because companies are having extreme difficulties locating and hiring employees with these skills, they are turning to outside service providers to fulfill their needs,” said Meredith McCarty, senior analyst with IDC’s Internet services research program.
McCarthy added that as demands for faster, more reliable services increase, corporations are also pressured to use outside providers.
“As more corporations deploy e-commerce systems, back-end systems integration work will play a larger role, causing average engagement values and overall spending to increase,” McCarty said.
IDC’s report also ranks the largest Internet service firms according to 1998 revenues.
While large, traditional IT service firms currently dominate the list, analysts said the Internet services market offers a relatively even playing field that allows new Internet firms to capture market share. According to IDC, flexibility and creativity have a greater influence on Net customers than traditional factors such as brand reputation.