It could go either way

According to Gartner, the IT outsourcing market (including desktop, data centre, mainframe, networks, midrange/hosting and applications) was worth $193 billion in 2004 and will be worth an estimated $260 billion by 2009.

In the same breath, Gartner tells us market share for the top 10 IT outsourcers during 2009 will decline to 40%, equalling a revenue shift of $5.4 billion.* Gartner further says discrete (ie internal) IT services market will shrink from 48% in 2004 to 43% of the total market in 2009, business process outsourcing (BPO) will increase from 19% to 23%, and IT outsourcing (ITO) will increase from 33% to 34% between 2004 and 2009.

In other words, the outsource market is growing, spend is moving away from internal IT to outsourced options, but the major outsourcers are going to lose market share.

In addition, Gartner says: "Average contract values and contract terms have been decreasing or otherwise troubled over the past six years. In 2000, the average outsourcing contract value was $619 million, compared with $200 million in 2005. Even with a probable increase for the first time in three years expected for 2006, the long-term trend remains. Shorter contract terms combined with less revenue allow organisations more opportunity for evaluation of other providers, further forcing more value for less cost."

By contrast, a Computerwire report* released in January, while noting that contract values have, indeed, declined in recent years, says: "A report out this week from Susquehanna Financial Group LLLP highlighted $45 billion worth of IT services contracts out for bid in 2007, including new initiatives planned by clients including Sara Lee, Visteon and DaimlerChrysler."

It adds that outsourcing advisory firm Morgan Chambers estimates that about 60% of the base revenues for some major IT services suppliers will be up for renewal or be re-let in the next 18 months.

The report further states the biggest contracts expected to be awarded anywhere this year will be under the US government's planned modernisation of its federal telecoms infrastructure. "[The US government] has two big contracts out to tender: the first, a $48 billion, 10-year deal expected to be awarded in March, and a second, $20 billion, 10-year deal scheduled for May."

The report goes on to provide a table of eight outsource deals, across the US and Asia Pacific region, expected to be awarded this year, with an estimated total value of $70 billion, as well as listing seven deals worth a total of $3 billion of UK business up for grabs.

Accenture's outsourcing lead John Bell says the company is expecting to see the local infrastructure outsource market grow at between 10% and 15% per annum, 15% plus growth in applications outsourcing and big growth in the still relatively immature BPO market.

Local outsourcing players interviewed for this feature concur that contract periods are getting longer and that there is still a lot of business up for grabs.

Based on this and the above sentiments, ITWeb can only conclude that, when it comes to outsourcing, what's really going to happen over the next five years is probably anybody's guess.

* Gartner information courtesy of Gartner Africa. Sourced from The Future of Outsourcing: What the Numbers Tell Us, May 2006 and Gartner's Top Predictions for IT Organisations and Users, 2007 and Beyond, December 2006.
* Computerwire information courtesy of Marketworks. Sourced from Computerwire MarketWatch, 19 January 2007.