Mumbai: Are the worlds 'top 50' IT services vendors losing markets to more agile, smaller firms? Several industry analysts have been predicting this for some time now.And now comes a report by the respected London-headquartered global market analyst Datmonitor, that seems to authenticate this, so far, informal view.

According to new research by market analyst Datamonitor, the world's 50 largest IT services vendors booked combined revenue of $262bn last year, but grew at a slower rate than the overall market.

Conducted annually, results from this year's Datamonitor's research Global IT Services Top 50 Rankings, seem to vindicate the belief of many industry analysts that some of the sector's larger players are losing out to smaller, more focused vendors.

The vendors, which ranged from IBM Global Services with sales of $47 billion to Patni Computer Systems with $450 million, increased their combined sales by 1.9 per cent over the previous year. But this is well below the 8 per cent growth in the overall market for external IT services expenditure recorded by Datamonitor.

Datamonitor ranked the top 50 suppliers, based on their revenue figures reported in their most recent fiscal years. The numbers used are the "as reported" figures in annual results statements, and are not adjusted for foreign exchange fluctuations, disposals or acquisitions. The list excludes companies that make the bulk of their revenues from reselling products, and captive IT operations that make the majority of their revenue from their parent organisations.

There was little change at the top of the rankings, with IBM, EDS, Fujitsu and Accenture again placed as the 'top 4', although BT Global Services overtook its German peer T-Systems to take eighth spot. However, India's five largest players all made significant moves up the league table, growing their combined sales by 35 per cent to $9.3 billion.

Datamonitor estimates the size of the global IT services market at $513 billion in 2005, meaning that the 50 largest vendors claimed a share of 51 per cent. The largest player, IBM Global Services accounted for a 9 per cent share, highlighting the relatively fragmented state of market.

The 10 fastest-growing IT services vendors in the top 50 rankings last year were either specialists in low-cost offshore delivery (Cognizant, Satyam, Patni, TCS, Infosys, HCL and Wipro), or focused on the lucrative US central government and defence sector (SRA, CACI and SAIC).

India's big IT services companies also ranked as the most profitable suppliers in the top 50 rankings in terms of both net and operating profit margin. This is due to the lower salary costs in India, which can be as much as 50 per cent lower for some skills over comparable rates in the US. Infosys was the most profitable supplier in terms of net profit margin with a 26 per cent in its most recent fiscal year.

The combined headcount of the top 50 vendors grew 18 per cent to 1.58 million last year, driven by aggressive recruitment in low-cost countries such as India. That country's biggest player, Tata Consultancy Services, added more than 27,000 new staff last year to take its total workforce to 66,480, while EDS Corp plans to increase its offshore headcount from 14,500 in 2005 to 21,100 this year.

Nick Mayes, principal analyst, global computing services, at Datamonitor, noted, "The game has changed for many of the traditional powerhouses in the IT services market. Pricing pressure is sweeping through infrastructure and applications services, and clients are opting for smaller outsourcing engagements rather than mega-deals. Bigger suppliers are becoming increasingly reliant on M&A activity to improve their top line growth."