Cloud to rain on IT outsourcers' parade

Market grew 7.8 per cent last year but rise of cloud will spawn winners and losers, says Gartner

The rise of cloud could hamper the growth of infrastructure-focused IT outsourcing providers, Gartner has warned.

According to the market watcher, global IT outsourcing revenue rose by a solid 7.8 per cent last year to hit $246.6bn (£155.9bn).

Market leader IBM grew at an identical rate to the market, allowing it to grab a 10.9 per cent share of the spoils. Despite growing at just two per cent, HP retained second spot, while Fujitsu leapfrogged CSC into third spot. Accenture rounded out the top five.

Despite the healthy top-line growth rate, Gartner warned that the evolution of the market will spawn winners and losers.

Bryan Britz, research director at Gartner, said: "Revenue cannibalisation resulting from client adoption of industrialised, and often cloud-based, services risks muting the growth opportunities for the ITO providers that are heavily weighted in infrastructure outsourcing."

According to Gartner, 43 providers booked 2011 revenue of $1bn or more, with India-based players and providers rooted in cloud-based services delivering the highest growth. Stripping out those two groups of players – as well as those that made sizable acquisitions last year – the remaining group of large ITO providers grew by a more muted 6.5 per cent.

"For many leading providers in the ITO market, 2011 revenue results demonstrate how challenging simply maintaining a market share position has become, much less gaining share – and this challenge is likely to worsen over the next few years for providers that do not address these forces," said Britz. "The challenges are likely to spur consolidation to augment growth, posing risk to the consolidators, because acquisitions have been a challenge in the IT services market."