IT outsourcing boom predicted

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IT outsourcing boom predicted

The current shortage of skilled IT personnel is set to provide the main catalyst in driving the European IT outsourcing market to rocket from last year’s level of $40bn (£27bn) to $174.6bn (£116.5bn) in 2006, according to a new study.

The study, undertaken by international marketing consultants Frost & Sullivan, claims that the high growth rate will be sustained by contract renewals from existing installed bases looking to extend their systems, network and applications. While globalisation and deregulation of markets initiated the trend for organisations to lower prices and cut operational costs to stay competitive, pushing outsourcing into the business mainstream, it is skills shortages rather than cost-cutting that will continue the trend, according to Judith Brown, research analyst at Frost & Sullivan. “With competition intensifying among all vertical markets across Europe, companies are seeking ways to gain a competitive edge over their rivals. IT outsourcing offers strategic benefits and enables companies to leverage non-core IT activities and concentrate on their core competencies.” Another driver for the European IT outsourcing market is set to be e-commerce, as the companies who now possess a Web site require the facility to perform full e-commerce transactions and will therefore seek a vendor that can offer end-to-end service, encompassing everything from systems integration and network services to the creation of a Web front page.

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