IDC slashes European services outlook

Adapt to survive: IDC claims services firms that have minimised their cost base will forge ahead next year

The European IT services market is set to enter negative growth this year as support, training and project revenue tumbles, IDC has claimed.

The research house predicts the market will contract 0.6 per cent this year, a point down from its previous forecast of 0.6 per cent growth. A gradual recovery is expected to start next year, with growth returning to the tune of 1.3 per cent in 2010. IDC anticipates the compound annual growth rate will stand at 3.2 per cent between this year and 2013.

Project revenue is predicted to drop three per cent this year as firms continue to get cold feet about investing in major deployments or costly upgrades. IDC asserts, however, that businesses are still happy to spend on IT which optimises supply chains, helps retain customers or smooths M &A integration.

Outsourcing is still expected to grow this year, with revenue projected to spike 4.2 per cent, a fifth of a point down on IDC's previous forecast. The research firm claims application outsourcing remains a fruitful area as end users seek short-term cost savings.

Support and training is set to endure a torrid 2009, with revenue expected to drop almost five per cent. The IT training market is set to plummet by 10.4 per cent as firms opt for an ad hoc approach to education.

Laura Converso, IDC's research manager for European software and services, said: "Companies are rethinking their top priorities, looking at projects that will provide an immediate return on investment, deferring large new IT projects and turning to outsourcing to lower their cost structures."

IDC indicates that this year's turnaround in expectations for the services market is largely fuelled by the continuing decline in western European GDP. In the past three months, GDP forecasts have been slashed by 1.5 per cent and a four per cent dip overall is now expected in 2009.

IT services market forecasts for this year and next have been cut in all 16 western European countries. Ireland is singled out as one of the worst hit, but IDC indicates that recent GDP data points to an increasingly stable macro-economic environment.

Firms that have acted quickly this year to minimise their cost base and adopt a global and industrialised approach to service delivery will soon flourish at the expense of less adaptive rivals, IDC claimed.