Consolidation a key factor for the future

Consolidation is set to accelerate as suppliers merge to create economies of scale or focus on specific sectors, although non-traditional players will enter the outsourcing market from now until 2003.

While IBM Global Services, EDS and CSC will continue to dominate in terms of market share, competition will continue to be intense, particularly with the advent of suppliers from broader IT services, communications, technology and software publishing sectors.

Allie Young, analyst for outsourcing services at Dataquest, said at the ServiceTrends '99 conference: 'There is an evolving business model of outsourcing. Although IT management services for the data centre, desktop and network remain the cornerstone of the outsourcing relationship, in the next two years customer demand for business systems involving things such as e-commerce, enterprise application outsourcing and customer relationship management will accelerate.'

But the sector is also broadening out from traditionally dealing with IT infrastructure management issues such as the data centre, desktop and networks, to include systems integration services and business process outsourcing with the aim of improving performance and aligning business and strategies.

By 2002, this will lead to contracts that emphasise business benefits and shared risk and reward as users demand more business value from their outsourcing relationships.

As a result, senior business staff such as chief executives and chief operating officers will have more influence over the outsourcing process - even initiating an outsourcing decision in 60 per cent of situations rather than relying on MIS managers, claimed Young.