IT outsourcing set to grow - IDC

The dour economy is forcing companies to consider offshore IT outsourcing in a bid to cut costs and optimise headcounts, according to analyst firm, IDC, says ARNnet.

In a report titled, 'Australia outsourcing services market forecast and analysis 2009-2013', IDC valued the outsourcing market at $6.4 billion in 2008, and tipped a compound annual growth rate of 4% over the next five years, taking the market's value to nearly $8 billion.

The figures encompassed sub-markets including applications management, desktop management, hosted applications management, hosted infrastructure services, IS outsourcing and network management.

Communications firm Kcom is set to outsource its integration and managed services (I&MS) unit, which includes integrator Affiniti, to BT, reports CRN-UK.

The Telegraph reports that the deal could help facilitate an annual cost reduction of £10 million. Channel onlookers have long predicted that Affiniti, which Kcom acquired in 2004, would eventually be spun off by the Hull-based company.

Such speculation was not dampened when incoming Kcom chief executive Bill Halbert launched a strategic review in November following a tough year for the I&MS arm. The division has lost well over 200 staff in the last 18 months as annual revenues dropped 10% in the nine months to the end of 2008.

Analysts predict that the global outsourcing market is set to grow by more than 8% this year as businesses look to save money on IT expenditure, writes Times Online.

Yet two reports just published suggest that this could be a costly mistake. Companies are likely to emerge from the recession lacking in innovation and locked into cheap-and-not-so-cheerful contracts that are expensive to renegotiate or cancel.

Leslie Willcocks, director of the outsourcing unit at the London School of Economics and Political Science - which produced the report 'Outsourcing in difficult times: Releasing cost but maintaining control with Logica', the IT and business services company - says when the recession hit, companies initially deferred making decisions, so some contractors waivered fees in a bid to get contracts signed.