I spoke to Ovum yesterday about its latest research on the IT services sector. It revealed that sales were on the increase again. See the article I wrote here.
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One of the interesting things that Alexander Simkin, the Ovum analyst that covers IT services, said was that the last recession differed from previous slowdowns because IT outsourcing did not actually increase. Previous economic slowdowns forced businesses to outsource to cut costs. But not this one.
I had a conversation with Jean Louis Bravard about this. He is a director at sourcing broker Burnt-Oak Partners and has headed up EDS’s financial services business globally in the past. He says it is true that the last recession didn’t increase outsourcing but it is not related to the recession itself but the maturity of the businesses buying IT services.
Although the last recession was pretty unique in its severity Bravard says the reason businesses stopped buying IT services is because they no longer see it as just a cost cutting exercise but a way of generating business. Because the recession was severe business was low for everybody so there seemed little point investing in IT services until the recovery.
It is probably a mix of the severity of the recession and the desire for businesses to generate business through IT services investments.
Has the business sector really matured when it comes to buying IT services?
It will be interesting to see what kind of outsourcing contracts account for the growth. Will it be cost cutting deals that see businesses take low cost time and materials or will it be more sophisticated outcome based contracts? Or will it be a bit of both?