Worldwide Services Operating Income for the Entire Market Increased in 2013 Despite Lackluster Revenue Growth, According to IDC

In a newly released study, International Data Corporation (IDC) announced that services operating income for the entire services market increased from 12.3% in 2012 to 13.4% in 2013. Vendors most commonly attributed this increase to the reduction of their labor cost base, more specifically this included head count reduction, increased productivity/utilization rates, and an increased offshore presence.

Additional findings include:

• Support and training services remained the most profitable service line for the entire analysis period.
• The second and third most profitable service lines were business consulting and IT project-based services, respectively.
• IT outsourcing was the least profitable service line in 2012 and 2013.
• Asia/Pacific was the most profitable region for services, followed by the Americas and EMEA.

"Profitability in the worldwide services industry has continued on an upward trajectory in 2013 in spite of lackluster revenue growth. The main driving force behind this paradoxical trend is vendors have been able to decrease their costs at a rate faster than revenue, resulting in an overall gain to profitability in spite of falling revenue," said Chad Huston, Senior Research Analyst, Global Services Markets and Trends.

The study, An Update to Profitability in the Worldwide Services Market (IDC #251588), analyzes profitability trends in the services market as a whole and then provides quantitative metrics and commentary for profitability by type of service, geography and vertical.