Framingham, MA — April 3, 2003 — Worldwide spending on information systems (IS) outsourcing services reached more than $68 billion in 2002 and is expected to surpass $99 billion by 2007, representing a five-year compound annual growth rate (CAGR) of 7.7 percent, according to a new report from technology research firm IDC.
In its new report, "Worldwide and U.S. IS Outsourcing Services Forecast, 2002- 2007," IDC presents its most recent spending forecast for IS outsourcing services in the United States and worldwide and explores the underlying market forces that drive spending on IS outsourcing. IDC also looks at the leading vendors in both the U.S. and regional markets.
IDC found that corporate and government spending on IS outsourcing services in the United States reached $30 billion in 2002 and is expected to surpass $43 billion by 2007, representing a five-year CAGR of 7.2 percent.
"As companies worldwide deal with dynamic technological and economic changes, outsourcing is increasingly viewed as an attractive operational alternative and a source of competitive advantage," said Cynthia Doyle, program manager for information technology (IT) outsourcing and utility services research at IDC.
Companies around the world are turning to outsourcing for a variety of reasons, Doyle said, including to:
- help reduce or stabilize costs;
- gain access to advanced technology;
- compensate for a lack of skilled IT workers;
- improve business efficiency;
- meet earning projections;
- tie technology to business value; and,
- remain competitive in the global marketplace.
Key trends in the U.S. IS outsourcing services market presented in IDC's study include the following:
- Longer, more complex decision-making processes on the part of buyers are leading to longer outsourcing sales cycles for suppliers.
- There has been a gradual and, IDC believes, temporary shift (apparent since early 2001) from the signing of large, billion-dollar outsourcing deals to smaller, more focused outsourcing and managed services engagements.
- IS outsourcing has become a relatively mature market, with a handful of established players competing for a limited pool of new customers.
From a regional perspective, IDC's research shows that the United States represented the strongest outsourcing market in the world in 2002, accounting for about 45 percent of all IS outsourcing spending. As in previous years, Western Europe also exhibited strong IS outsourcing spending. Countries in Asia/Pacific spent the least on IS outsourcing services but will experience the highest spending growth through 2007, with a CAGR of 9.2 percent.