The worldwide IT outsourcing (ITO) market is forecast to reach $288 billion in 2013, a 2.8 per cent increase in US dollars (and 5.1 per cent in constant currency*) from 2012, according to Gartner, Inc. Compared with Gartner's previous forecast, nearly all ITO segments are now forecast to grow more slowly during 2013.
"We continue to see overall market growth being constrained by near-term market factors, such as evolving ITO delivery models, economic, political and labour conditions, and service provider financial performance," said Bryan Britz, research vice president at Gartner. "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."
Gartner's forecast includes slight upward revisions for both custom application outsourcing and infrastructure utility services (IUS) for 2014 through 2017. 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.
"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," said Mr Britz. "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 centre service segment growth rates. The global market size for data centre outsourcing is in gradual decline due to workloads moving to IaaS and to IUS exceeding the net-new adoption of data centre outsourcing."
According to Gartner, accelerated buyer plans related to bring your own device (BYOD), and reduced enterprise support requirements for end-user devices produce a more tempered outlook for end-user outsourcing than in past quarters. Outsourced support for mobile end user devices will see strong growth through 2017 due to increased enterprise adoption of mobile devices, including smartphones, tablets and other handheld devices. 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.
ITO markets in emerging Asia/Pacific, Latin America and Greater China will all grow more than 13 per cent in 2013 and 2014. Expansion by multinationals into these regions, new buyers of ITO that are themselves growing organisations, and fertile economic conditions all drive the positive outlook.
In North America, Gartner predicts that buyers will seek to transition more IT work to annuity-managed service relationships for cost takeout and more predictability in IT costs. This will keep ITO growing in the region through 2016. Economic austerity initiatives (fuelled by a reluctance to hire or make large capital purchases) and organisations pursuing asset-light IT strategies continue to push clients toward externally provided services.
"Historically, 'run the business' costs have been less impacted by economic challenges than has discretionary spending on new projects," said Mr Britz. "Nevertheless, 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."
*Exchange rates and constant currency
Exchange rates remain a significant factor in analyzing growth in any single currency. Gartner forecasts in local currencies but typically describes results in US dollars. Movement in the dollar relative to other currencies complicates the interpretation of forecasts and can distort spending comparisons between regions that use different currencies. When the dollar depreciates against currencies of a particular region, dollar-valued spending is raised relative to local-currency-valued spending, and vice versa. The impact of dollar movements on a forecast can be determined by re-expressing it in constant currency - dollars adjusted for historical purposes and projected movements in the dollar.
The strength of the US dollar gives the appearance of markets in decline when viewed in US dollars, but a more accurate picture of growth is seen when viewed in the local currency of these regions. Gartner forecasts can be expressed and analyzed in numerous local currencies.
More detailed analysis is available in the report "Forecast Analysis: IT Outsourcing, Worldwide, 2Q13 Update." The report is available on Gartner's web site at http://www.gartner.com/....
About the Gartner Outsourcing and Strategic Partnership Summits 2013
More information on outsourcing trends and strategies will be provided at the Gartner Outsourcing & Strategic Partnerships Summit 2013, 9-10 September in London, UK, and 23-25 in Orlando, Florida. Details on the London Summit can be found at www.gartner.com/.... Members of the media can register for this event by contacting laurence.goasduff@gartner.com. Details on the US Summit can be found at www.gartner.com/.... Members of the media can register for a press pass by contacting janessa.rivera@gartner.com.
Information from the Gartner Outsourcing & Strategic Partnerships Summits 2013 will be shared on Twitter at http://twitter.com/... using #GartnerOUT.
"We continue to see overall market growth being constrained by near-term market factors, such as evolving ITO delivery models, economic, political and labour conditions, and service provider financial performance," said Bryan Britz, research vice president at Gartner. "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."
Gartner's forecast includes slight upward revisions for both custom application outsourcing and infrastructure utility services (IUS) for 2014 through 2017. 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.
"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," said Mr Britz. "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 centre service segment growth rates. The global market size for data centre outsourcing is in gradual decline due to workloads moving to IaaS and to IUS exceeding the net-new adoption of data centre outsourcing."
According to Gartner, accelerated buyer plans related to bring your own device (BYOD), and reduced enterprise support requirements for end-user devices produce a more tempered outlook for end-user outsourcing than in past quarters. Outsourced support for mobile end user devices will see strong growth through 2017 due to increased enterprise adoption of mobile devices, including smartphones, tablets and other handheld devices. 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.
ITO markets in emerging Asia/Pacific, Latin America and Greater China will all grow more than 13 per cent in 2013 and 2014. Expansion by multinationals into these regions, new buyers of ITO that are themselves growing organisations, and fertile economic conditions all drive the positive outlook.
In North America, Gartner predicts that buyers will seek to transition more IT work to annuity-managed service relationships for cost takeout and more predictability in IT costs. This will keep ITO growing in the region through 2016. Economic austerity initiatives (fuelled by a reluctance to hire or make large capital purchases) and organisations pursuing asset-light IT strategies continue to push clients toward externally provided services.
"Historically, 'run the business' costs have been less impacted by economic challenges than has discretionary spending on new projects," said Mr Britz. "Nevertheless, 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."
*Exchange rates and constant currency
Exchange rates remain a significant factor in analyzing growth in any single currency. Gartner forecasts in local currencies but typically describes results in US dollars. Movement in the dollar relative to other currencies complicates the interpretation of forecasts and can distort spending comparisons between regions that use different currencies. When the dollar depreciates against currencies of a particular region, dollar-valued spending is raised relative to local-currency-valued spending, and vice versa. The impact of dollar movements on a forecast can be determined by re-expressing it in constant currency - dollars adjusted for historical purposes and projected movements in the dollar.
The strength of the US dollar gives the appearance of markets in decline when viewed in US dollars, but a more accurate picture of growth is seen when viewed in the local currency of these regions. Gartner forecasts can be expressed and analyzed in numerous local currencies.
More detailed analysis is available in the report "Forecast Analysis: IT Outsourcing, Worldwide, 2Q13 Update." The report is available on Gartner's web site at http://www.gartner.com/....
About the Gartner Outsourcing and Strategic Partnership Summits 2013
More information on outsourcing trends and strategies will be provided at the Gartner Outsourcing & Strategic Partnerships Summit 2013, 9-10 September in London, UK, and 23-25 in Orlando, Florida. Details on the London Summit can be found at www.gartner.com/.... Members of the media can register for this event by contacting laurence.goasduff@gartner.com. Details on the US Summit can be found at www.gartner.com/.... Members of the media can register for a press pass by contacting janessa.rivera@gartner.com.
Information from the Gartner Outsourcing & Strategic Partnerships Summits 2013 will be shared on Twitter at http://twitter.com/... using #GartnerOUT.
