This year will see over a quarter of a trillion dollars spent on IT outsourcing globally, but Western European organisations are holding back investments in the uncertain economy, according to the latest research from Gartner.
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The analyst company predicted $251.7bn will be invested in IT services in 2012, a 2.1% increase on last year, but spending in Western Europe will fall 1.9% as economic turmoil continues to blight the region.
“A challenging economic scenario that worsened in late 2011 continues to affect the government policies and end-user sentiment in many key European countries, resulting in a forecast for Western Europe ITO growth decline of 1.9% in US dollars during 2012,” said Gartner.
Datacentre outsourcing sales, which represented 34.5% of the market in 2011, will decline by 1% in 2012, the analyst firm predicted.
"The datacentre outsourcing market is at a major tipping point, where various datacentre processing systems will gradually be replaced by new delivery models through 2016," said Bryan Britz, research director at Gartner.
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Application outsourcing to increase
The application outsourcing market is estimated to reach $40.7bn in 2012, a 2% increase from 2011.
Britz said the application outsourcing market is changing. “The burdens of managing the legacy portfolio, along with the limitations of IT budgets, have shifted the enterprise buyers to be cautious and favour a more evolutionary approach to other application services, such as software-as-a-service [SaaS]," he said.
"New applications will largely be packaged and/or SaaS-deployed to extend and modernise the portfolio in an incremental manner. While custom applications will remain 'core' for many organisations, the trend in the next few years to SaaS enablement in the cloud will reflect in the growth," said Britz.
Cloud computing was the fastest growing service type, with 48% growth taking total spending to $5bn.
Gregor Petri, research director at Gartner, said cloud computing is currently primarily used to provide automation of basic functions, but this will change.
“As next-generation business applications come to market and existing applications are migrated to use automated operations and monitoring, increased value in terms of service consistency, agility and personnel reduction will be delivered," he said.
"Continued privacy and compliance concerns may, however, negatively affect growth in some regions, especially if providers are slow in bringing localised solutions to market," added Petri.