Services outsourcing in western Europe to slide in 2012

Gartner figures suggest outsourcing and cloud computing expansion will not continue in western Europe this year despite worldwide growth

The worldwide spend on IT outsourcing (ITO) services is on pace to expand 2.1 per cent from 2011 to reach $251.7bn (£160.6bn) this year, despite a predicted decline in western Europe of 1.9 per cent.

The statistics are from Gartner's latest figures. Western Europe, the market research giant said, is continuing to suffer from a "challenging" economic scenario that worsened in late 2011 and continues to affect government policy and end-user sentiment in many key European countries.

"Reinvigorated economic pressure is delaying the willingness of many commercial organisations to focus on enhancing competitiveness rather than cost reduction," the analysis said. "In addition, the European public sector will continue to see a cautious budget environment throughout 2012."

Outsourcing initiatives, where favoured by either central or local government bodies in western Europe, would be aimed at reducing IT cost through efficiencies and rationalisation.

Gregor Petri, research director at Gartner, said cloud computing services as a subset of IaaS globally are tipped to grow 48.7 per cent worldwide to $5bn, adding that today these services primarily automate only basic functions, although that will change.

"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," Petri said.

"Continued privacy and compliance concerns may, however, negatively impact growth in some regions, especially if providers are slow in bringing localised solutions to market."

Drilling down further
The Asia-Pacific region – excluding Australia, New Zealand and Japan as well as, to some extent, Singapore and Hong Kong – is tipped to experience the most growth in ITO this year.

North America would also see ITO growth this year, according to Gartner, with buyers looking to move more IT work to annuity managed services relationships.

Application outsourcing would expand two per cent globally, from a 2011 spend of $39.9bn, reflecting enterprises' need to manage extensive legacy environments and commercial off-the-shelf packages. Modernisation via SaaS would happen, but in an incremental, evolutionary manner, according to Gartner.

Datacentre outsourcing, however, is a mature part of the ITO market and will decline to 33.5 per cent of the global market this year, Gartner said, having reached a major tipping point where various datacentre processing systems will gradually be replaced by new delivery models and move more into the SMB sector through 2016.

Additional information surrounding these figures is in Gartner's report Forecast Analysis: IT Outsourcing, Worldwide, 2010-2016, 2Q12 Update.