By Laurie Head
AIS Network Vice President
In their latest outlook issued just two days ago, Gartner, Inc., says that worldwide spending for IT outsourcing (ITO) services is on track to reach $251.7 billion in 2012, up 2.1 percent increase from 2011 spending of $246.6 billion.
Not surprisingly, the industry analyst firm reports that the fastest-growing segment within the ITO market is cloud compute services (part of the cloud-based infrastructure as a service/IaaS segment). Cloud compute services are expected to grow 48.7 percent in 2012 to $5.0 billion, up from $3.4 billion in 2011.
Gartner expects that North American buyers will seek to transition more IT work to annuity-managed service relationships for cost take-out and IT costs. This will keep ITO growing through 2016. Enterprises’ reluctance to hire or make large capital purchases, as well as their pursuit of asset-light IT strategies, continues to push clients toward consuming externally provided services, the firm says.
According to the Gartner press release, which addressed the global outlook:
“Today, cloud compute services primarily provide automation of basic functions. 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”, said Gregor Petri, research director at Gartner.
“Continued privacy and compliance concerns may however negatively impact growth in some regions, especially if providers are slow in bringing localized solutions to market.”
Data center outsourcing (DCO), a mature segment of the ITO market, represented 34.5 percent of the market in 2011, but growth will decline 1 percent in 2012. “The data center outsourcing market is at a major tipping point, where various data center processing systems will gradually be replaced by new delivery models through 2016. These new services enable providers to address new categories of clients, extending DCO from traditional large organizations into small or midsize businesses,” said Bryan Britz, research director at Gartner.
The application outsourcing (AO) segment is expected to reach $40.7 billion, a 2 percent increase from 2011 spending of $39.9 billion. This growth reflects enterprises’ needs to manage extensive legacy application environments and their commercial off-the-shelf packages that run the business.
“Change is afoot in the AO market. The burdens of managing the legacy portfolio, along with the limitations of IT budgets, have shifted the enterprise buyers to be cautious and favor a more evolutionary approach to other application services, such as software as a service (SaaS),” said Britz. “New applications will largely be packaged and/or SaaS-deployed in order to extend and modernize the portfolio in an incremental manner. While custom applications will remain ‘core’ for many organizations, the trend in the next few years to SaaS enablement in the cloud will reflect in the growth of the AO outlook.”
You can find additional information in the report, “Forecast Analysis: IT Outsourcing, Worldwide, 2010-2016, 2Q12 Update,” which is available on Gartner’s website.