A recession beater Outsourcing

Source: Infomaticsonline

Written by Andy McCue

The economic downturn and a focus on core business operations will fuel massive growth in IT outsourcing, according to the Butler Group.

Worldwide spend on outsourcing will grow from $75bn this year to $175bn by 2005, the analyst group says in its Strategic Sourcing - Effective Alternatives for the Enterprise report.

And while the outsourcing market is dominated by big players like IBM Global Services and EDS, there will be a sharp rise in the number of medium-sized organisations of 500 to 5,000 employees turning to smaller and more specialist outsourcers.

Users should look at outsourcing as a way of cutting infrastructure costs and adding flexibility in uncertain economic times, said the analyst.

"IT is a utility: a service provided to the business in the same way as any other. How it works is no longer an issue, provided it does the job required, and where a third party can provide or manage a service more efficiently, it is prudent to follow that route," said Maxine Holt, senior research analyst at the Butler Group.

Butler defines outsourcing as the contracting out of business services to a third party, including extended service providers and off-shoring.

Extended service providers range from application service providers (ASPs) and web hosting to more specialised services covering security and wireless.

The entrance of Microsoft, IBM, Oracle and Hewlett Packard into web services with the adoption of software rental as a business model will boost global spend on these services from $7bn this year to $26bn by 2005, according to the report.

Locating services with an overseas supplier will also continue to increase, it says. But the report warns users not to choose ASPs that cannot customise services.

Companies such as Channel 4, British Airways, Friends Provident and Thomas Cook have already located application development or services in India, and spending will increase from $17bn this year to $50bn by 2005.