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Outsourcing bucks decline in European services market

Ross Bentley

The Western European IT services market slipped into decline in 2002, although the number of outsourcing contracts rose, new figures show.

The services sector contracted by 0.11%, the first time this has happened since analyst firm Gartner has been tracking the sector.

The fall in the overall market was primarily caused by a 4.6% drop in the consulting and development and integration services sectors, reflecting how many IT departments last year shelved new projects to focus on cost control.

Outsourcing was the only segment within the overall IT services market to see positive growth, expanding by 6.3%.

Speaking at the firm's Outsourcing and IT Services summit in London, yesterday, Roger Cox, vice-president of IT management strategy and planning research at Gartner, said the surge in outsourcing activity resulted from a rise in business process outsourcing, an increased interest in utility computing and the strong emergence of offshore outsourcing.

And this trend looks set to continue, with Gartner predicting that three quarters of large and leading medium-sized companies in Europe will consider running at least some of their IT systems via an offshore provider by 2004. Within a few years leading FTSE 1000 companies will have outsourced half of their IT activities.

The continued swing to IT outsourcing means that IT staff will have develop new skills sets as they move from running It operations in-house to managing relationships with IT suppliers.

"Current levels of management in the IT services industry can be compared to the construction industry of around 1860," said Cox.

"The skills and training required to implement and manage ongoing outsourcing projects are not yet mature, and the industry is still going through irreversible changes and development. As an outsourced industry, IT is maturing fast but is still a long way from real stability."

"The companies that outsource successfully are investing time and resources now in the skills, processes, resources and governance structures to manage long-term relationships in uncertain and changing times," Cox added.


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