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Gartner: Outsourcing to drive IT services recovery

Last year was the winter, spring, summer and fall of IT services discontent. But Gartner analysts predict growth will return this year -- with outsourcing driving the money train.

The IT services industry took a record-breaking beating in 2002 but, this year, those bruises should begin to heal.

Outsourcing could be the proverbial raw steak on the industry's black eye.

According to some fresh data from Gartner Inc., the market for IT services should get back on its feet this year and start to recover, albeit slowly. Analysts forecast growth of 3.5% for 2003, which would make it a $555 billion market.

What's going to drive the growth? Outsourcing.

"This faster growth will result from vendors selling transformational outsourcing services that enable buyers to reduce their costs and improve their IT infrastructure," said Kathryn Hale, principal analyst for the Stamford, Conn.-based research firm's worldwide IT services group.

Hale said that outsourcing can grow because it eats funds that are not in a given company's IT budget. That enables growth in spite of static IT spending.

Gartner also predicts that North America will account for nearly half of global IT services revenue, while Western Europe should drive about 30% of the industry.

Managed security services will be one of the outsourcing options on the grow in the next couple of years. It may be relatively new, but it's a market that seems to be maturing, judging from the increasing number of vendors.

Earlier this week, Gartner released data showing that 60% of enterprises will outsource some form of security technology by 2005. According to analyst Victor S. Wheatman, most firms need outside help because they just don't have the resources to do the security juggling act: keeping the good guys in while simultaneously keeping the bad guys out.

If you're looking to take security outside the company, Wheatman recommends looking at providers that have about 50 professional services workers.

IT services should also benefit from less parsimonious CIOs. Robert De Souza, industry analyst for Gartner's IT services group, said that IT budgets should put on some weight within the next 12 to 18 months.

"This recovery would result from improving business confidence and a modest but growing need for users to maintain a competitive infrastructure, while also managing costs," he said.

A recent Merrill Lynch survey of 100 CIOs in North America and Europe also showed that IT execs are more likely to loosen the purse strings this year than they were in 2002.


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