Growth is likely to continue for the IT services sector this year, but it will be hard won.

As 2010 drew to a close, sentiment was split among IT services sector companies over whether customer demand would grow or level off in 2011. In 1Q 2011, the answer came down on the side of growth — but by a slim margin.

Modest, but broad-based, sales growth

The IT services sector increased median sales 3% YOY for the trailing 12 months ending in 1Q 2011, better than the median sales decline the sector struggled with in early 2010 but lower than the 7% YOY sales growth posted for full-year 2010. And unlike some other sectors, where we noted a large disparity between "winners" and "losers," nearly all sector companies managed to gain — only two companies saw sales declines.

The sector also managed YOY increases in median operating income (10%) and margin (11%), despite dealing with such issues as the rising cost of labor in developing economies like India and China.

Key performance indicators for IT services (median value), 1Q11

Outlook for IT services

Growth is likely to continue for the IT services sector this year, but it will be hard won. In addition, a new headwind may be gathering: changing global visa policies have the potential to slow growth.

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