01 February 2012

IT outsourcing sees unexpected growth

Total spending on IT and business process outsourcing in Europe last year was the highest ever in a 12 month period – and 27% up on 2010.

That's among the headline figures from Information Services Group's TPI index, which suggests a renewed appetite for IT outsourcing.

Duncan Aitchison, president of ISG for North Europe reveals that total European outsourcing contracts in 2011, including BPO and IT projects of more than €20m, were valued at €44bn.

He also says that in 2011, eight out of 10 megadeals worth more than €800m were in Europe, which also accounted for 60% of the total global outsourcing contract value.

Aitchison reckons growth was largely the result of "significant megadeal activity and large contracts in historically less robust outsourcing markets, such as France and southern Europe".

And that includes in the UK, where private sector demand for outsourcing increased – with 15% more contracts in the final quarter of 2011 than the same period of 2010.

Meanwhile, ISG's report expects utility pricing, where customers pay as they go, will be a key trend for 2012.

"Despite the hype and expectations set around cloud and utility computing, there has been relatively little change to date in the structure of outsourcing contracts," observes Aitchison.

"Looking ahead, we believe that far more business will be written using new pricing dynamics by vendors aggressively offering true 'pay-by-the-drink' pricing," he forecasts.

That prediction is underpinned by Sean Finnan, head of strategic outsourcing Europe at IBM Global Services, who sees growing interest. "We have clients coming back to us to talk about big deals again," he confirms.

Brian Tinham

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