IT services market will shrink as low-cost IT grows

The IT services market could shrink 5% to 10% year-on-year as a result of a surge of low-cost IT, analysts have warned.

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The IT services market could shrink 5% to 10% year-on-year as a result of a surge of low-cost IT, analysts have warned.

Research firm Gartner predicts that low-cost IT will increase, with offshore outsourcing and enterprise cost-cutting causing the IT services market to experience a year-on-year decline in average market price of up to 10% for three to five years. This follows a market loss of $42bn (£27bn) and plummeting outsourcing prices in 2009.

Virtualisation and automation will drive IT providers to deliver one-to-many services at one-third of in-house costs, said Gartner.

Claudio Da Rold, an analyst at Gartner, said, "Cost cutting, restructuring and the move toward offshore outsourcing continue to increase, while growth in emerging countries accelerates, widening the gap between high-growth areas and stagnant economies, and low- and high-cost IT providers.

"This trend could drive a prolonged reduction in the unit cost of IT services, significantly affecting the IT services market by 2013," added Da Rold.

Gartner advised organisations to invest in scenario-planning and risk management, to assess multi-sourcing environments against risks, as well as adding business value through risk-migration and business continuity planning.

Analyst Ovum said earlier this year that delayed and reduced enterprise IT projects will lead to almost flat growth in the IT services market in 2010.



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