Gartner has dialed down its 2013 market forecast for IT outsourcing (ITO), as changing delivery models, economic, political and labor conditions and the financial performance of service providers continues to constrain growth across all market segments. Gartner now forecasts a 2.8% year-over-year increase in the global ITO market for 2013, 5.1% in constant currency terms, according to a press release.
“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,” commented research vice president Bryan Britz.
In contrast, Gartner analysts forecast small increases for both custom application outsourcing and infrastructure utility services (IUS) between 2014 and 2017. And though the shift to software-as-a-service (SaaS) delivery models impacts the ITO market, Gartner includes SaaS in its software market, as opposed to ITO market forecasts.
“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 added.
“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 exceeding the net-new adoption of data center outsourcing.”
Accelerated buyer plans associated with Bring Your Own Device (BYOD) and a reduction in enterprise support requirements for end-user devices result in “a more tempered outlook for end-user outsourcing than in past quarters,” according to Gartner analysts.
Outsourcing for desktop device support is in a gradual decline that would be more pronounced were it not for growth in Latin America, emerging Asia-Pacific markets and Greater China, Gartner said. Outsourced support for mobile end-user devices, such as smartphones and tablets, will exhibit strong growth through 2017, however, Gartner analysts forecast.
ITO growth in emerging Asia-Pacific, Latin America and Greater China markets will come in at better than 13% in 2013 and 2014, Gartner analysts expect, driven by multinationals expanding, new ITO buyers and “fertile economic conditions.”
More IT work transitioning to annuity-managed service relationships will support ITO market growth in North America 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,” Gartner comments in the press release.
“Historically, ‘run the business’ costs have been less impacted by economic challenges than has discretionary spending on new projects,” Britz elaborated. “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.”
Gartner’s “Forecast Analysis: IT Outsourcing, Worldwide, 2Q13 Update” is available online.