European IT Services Market to Reach $243 Billion by 2012, Driven by Strong Growth in Outsourcing, Says IDC

MADRID – April 28, 2008 – According to a recent IDC study, the Western European IT services market performed better than expected in 2007, reaching a value of $192.3 billion and growing at 6.4% in constant currency. Due to the current uncertain economic situation, however, IDC is now taking a more conservative view of the market, with growth forecast at 4.8% CAGR throughout the forecast period to reach $242.8 billion by 2012.

"As the European economy cools down, the outsourcing segment continues to be the growth engine of the IT services market," said Laura Converso, research manager, IDC's European Services Research. "The overall outsourcing market will exceed the size of project-based services by 2008 and will account for 42% of the total IT services market by 2012. At a worldwide level, IDC estimates that Western Europe will eclipse the U.S. to become the largest geographic market for IS outsourcing by 2009."

Demand for IT services will slow down in 2008. At a total Western European level, IDC expects a 1.8% drop in spending growth compared to 2007, bringing total growth to 4.6%. IDC believes the credit crunch will not have as strong an influence in Europe as it did in the U.S., but the uncertainty will lead to fewer new contract signings. Among the top 5 European economies, IDC expects France, Italy, and the U.K. to grow below the Western European average, while growth in Germany and Spain will exceed the European average.

The crisis will probably be felt most strongly in project services and less so in support services, with little or no impact in the outsourcing segment. As the project services segment will represent around 38% of the total market in 2008, the final impact on the overall services market cannot be ignored.

During 2008, the alignment of IT with business needs will be a priority for companies in search of business flexibility and agility. However, many European enterprises will focus more on process efficiency and cost reduction than on top-line growth, and they will demand innovation from their suppliers to help them on their cost-reduction crusade.

IDC believes demand for innovation will increase in order to support business development. Innovation will be key, particularly in the outsourcing space, and will influence buyers' decisions as they enter the renewal phase and decide whether to stick to their existing supplier or switch to another services provider.

The overall outsourcing market will remain the fastest-growing segment, with 7.5% growth forecast for 2008. Outsourcing for cost-cutting reasons is likely to be an area of growth in 2008 to 2009 if enterprises begin to experience economic problems. The market is expected to grow at a CAGR of 7% throughout the forecast period.

The study, Western European IT Services Market 2007 and Forecast 2008-2012 (IDC #Q01Q, April 2008), analyzes IT services trends among Western European companies between 2007 and 2012 with a focus on the following services macro-markets: project-based services, outsourcing, and support services. The study presents a quantitative analysis of IT services spending by services foundation markets and country, and includes a qualitative analysis focusing on the key assumptions that IDC believes will shape demand for IT services in the forecast period.

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About IDC

IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 900 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 90 countries worldwide. For more than 43 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company.

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