Budgets and lower cost service affect European outsourcing market

Gartner expects a slight upturn in custom application outsourcing and infrastructure utility services, but Europe is being squeezed

Gartner's latest research has predicted a slight upturn in custom application outsourcing and infrastructure utility services (IUS), but Europe is being squeezed.

In Europe, Gartner has reduced the overall outlook for IT outsourcing (ITO) growth due to the pressure exerted on IT budgets by the current economic situation.

The analyst noted that the effects of regional economic challenges on the IT sector are now coming to bear through continued aggressive contract renewal and renegotiation, both client- and provider-originated, which is compressing overall end-user spending.

Bryan Britz, research vice-president at Gartner, said: "Enterprise buyers pursuing hybrid IT strategies and small and medium-sized enterprise buyers adopting infrastructure as a service (IaaS) are key drivers in cloud and datacentre service segment growth rates.” 

However Bryan Britz noted: “The global market size for datacentre outsourcing is in gradual decline due to workloads moving to IaaS and to IUS exceeding the net-new adoption of datacentre outsourcing."

The outlook for ITO is additionally being affected by less spending in the government sector. Governments are looking for IT efficiencies such as datacentre consolidation, rather than new transformational projects.

Another factor affecting ITO is utility IT services, which are driving down costs, Gartner said such IT services increase the rate of revenue cannibalisation, because the newer alternatives tend to be lower-cost services than the ones they are replacing.

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