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Economic recovery to benefit outsourcing suppliers, says Gartner

Outsourcing suppliers will be among the first to benefit from an upswing in the economy, says market analyst Gartner.

Its latest survey of company spending plans showed 85% of organisations anticipate that their spending with external service providers (ESPs) will increase or stay the same.

Three-quarters of firms were optimistic about an economic recovery, showing in their planning cycles that it has already began in 2009 or will occur in 2010.

For the survey, conducted in November and December 2009, Gartner contacted 1,073 private sector organisations in the US, Europe and Asia/Pacific to determine how economic changes have impacted IT services buying and decision making.

"The impact of the global economic recession in 2008 through 2009 has been significant, in some cases radically changing a vertical market or a company's competitive position. Buyers of services have been impacted in many areas, making them more cautious regarding IT spending," said Gartner vice-president Allie Young.

She said the recession had led to more contract renegotiations with ESPs, more use of offshore services and that chief finance officers were wielding more influence in procurement in IT services spending.

However, most buyers of IT and business process services would turn to ESPs to support the execution of their IT strategies, Young said.

She warned that differences in regional and vertical market conditions would still have an effect.

Gartner predicted average spending with ESPs would rise 7.13%. But Indian users expected to increase spending by 17.4%, and Japan users to cut by 1.5%.

Service providers had to take account of such differences, Young said. "The days of low-hanging fruit and sole-source decision making in IT services are largely over," she said

But deep relationships still gave ESPs a chance to grab new leads and expand their services with existing clients, often as sole-source opportunities, she said.

"We will remain in a hypercompetitive sales environment for some time, with cost continuing to dominate buyer considerations, and very likely more providers pursuing the same opportunities," said Young.

Young said the winners would seek growth, watch for market changes and get to know their customers better, the better to position themselves.


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