eWEEK content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.
The worldwide IT outsourcing (ITO) market is expected to reach $288 billion in 2013—a 2.8 percent increase in U.S. dollars, according to IT research firm Gartner—and compared with the firm’s previous forecast, nearly all ITO segments are now forecast to grow more slowly during 2013.
However, ITO markets in emerging Asia/Pacific, Latin America and Greater China will all grow more than 13 percent in 2013 and 2014. Gartner’s forecast includes slight upward revisions for both custom application outsourcing and infrastructure utility services (IUS) for 2014 through 2017.
“We continue to see overall market growth being constrained by near-term market factors, such as evolving ITO delivery models, economic, political and labor conditions, and service provider financial performance,” Bryan Britz, research vice president at Gartner, said in a statement. “Mature Asia/Pacific and Western Europe are the regions where the outlook is most tempered, partly due to currency but also reflective of our view that 2013 is likely to be similar to 2012 in these regions.”
In North America, Gartner predicted that buyers would seek to transition more IT work to annuity-managed service relationships for cost takeout and more predictability in IT costs, which in turn is expected to keep ITO growing in the region through 2016. Economic austerity initiatives (fueled by a reluctance to hire or make large capital purchases) and enterprises pursuing asset-light IT strategies continue to push clients toward externally provided services, the report noted.
Although software as a service (SaaS) impacts the ITO market, it is forecast as part of the software market, rather than as part of the ITO market. According to Gartner, accelerated buyer plans related to bring-your-own-device (BYOD) practices, and reduced enterprise support requirements for devices produce a more tempered outlook for outsourcing than in past quarters.
“Planned new adoption of ITO remains positive in all service line segments. However, constrained IT budgets, an evolving ITO delivery model, economic conditions and cost-focused buyers are limiting the growth potential of the ITO market,” Britz continued. “Enterprise buyers pursuing hybrid IT strategies and small and midsize business buyers adopting infrastructure as a service (IaaS) are key drivers in cloud and data center service segment growth rates. The global market size for data center outsourcing is in gradual decline due to workloads moving to IaaS and to IUS [infrastructure utility services] exceeding the net-new adoption of data center outsourcing.”
In addition, outsourced support for mobile devices is expected to experience strong growth through 2017 due to increased enterprise adoption of smartphones, tablets and other handhelds. Desktop outsourcing, however, is in a gradual decline that would be sharper were it not for uptake in Latin America, emerging Asia/ Pacific and Greater China, according to the study.
Britz also noted that historically, “run the business” costs have been less impacted by economic challenges than has discretionary spending on new projects, but increased client adoption of pricing models that create volume variability is causing the ITO market to exhibit more cyclical patterns.
“This shift will continue as clients seek to reduce the nearly two-thirds of IT budgets devoted to operations, while shifting the expense from capital expenditure to operating expenditure through the consumption of ITO service lines,” he concluded.