IDC Forecasts IT and Business Services by Industry: Success Rides on Understanding Industry Specific Needs and Proper Vendor Positioning

FRAMINGHAM, MA – August 10, 2005 – The U.S. outsourcing, project-based services, and support and training services markets are anticipated to experience moderate overall growth over the next five years, according to IDC, with growth within select industries exceeding market averages.

While the growth of outsourcing services within the discrete manufacturing, banking, and government sectors will hover around the market average, at about 9.3%, growth within the communications industry is expected to achieve a compound annual growth rate (CAGR) of 10.7%. Increased adoption of business process outsourcing (BPO) services within communications firms is expected to occur as they prioritize the outsourcing of key business processes, such as customer care and other back-office functions, to respond to competitive challenges faced from a host of technologies and players.

Within most industries, "BPO will continue to increase in popularity as firms begin to understand the business transformational benefits BPO providers offer in addition to cost savings," said Jason Spaulding, research analyst, Vertical Industry Research at IDC. "BPO providers must either demonstrate, or partner to demonstrate, that they meet all the capabilities and skills required for each specific industry," added Spaulding. Outsourcing providers also need to be aware that not all outsourcing engagement types need to be 'verticalized.' Some IS outsourcing services can be standardized and leveraged across industries, while others may require more vertically-oriented solutions and value-propositions.

The overall CAGR for project-based services is expected to be 3.3% over the five year forecast period. Banking, government, and healthcare, as well as what IDC terms other financial services, will be the industries in which the highest growth rates will occur. Healthcare will have an above average CAGR, an estimated 5% from 2005-2009. Driving this growth will be the increased need to utilize project-based services to gain advice, education, and implementation solutions that maximize the healthcare industry's investments in technology and process redesign as a means to improve productivity, manage costs, and increase patient satisfaction. A close second in terms of growth prospects, enterprise-wide integration projects, as well as retail advisor front-office integration and compliance considerations, will fuel the need for project-based services for securities and investment research firms.

As for services providers specializing in support and training services, IDC stresses that over the forecast period, success will ride on their ability to comprehend how hardware, software, and solutions spending priorities differ by industry, as well as demonstrate an understanding and ability to clearly articulate how firms in select industries can deploy and benefit from their services. Spaulding further noted that, "Support and training services, as well as project-based services, will increasingly become embedded in IT outsourcing and BPO deals as they become larger and more encompassing. Consequently, growth for standalone support and training services will slow, and vendors in both the support and training and project-based services will need to react by forming partnerships to ensure that they maintain a seat at the table."

IDC's industry-based services forecasts examine the five-year outlook for outsourcing, project-based services, and support and training services based on potential growth opportunities within 17 vertical industries. The set of studies include, U.S. Project-Based Services by Vertical Market 2005-2009 Forecast (IDC #33446), U.S. Support and Training Services by Vertical Industry 2005-2009 Forecast (IDC #33667), and U.S. Outsourcing Services by Vertical Market 2005-2009 Forecast (IDC # 33580). On a more granular level, the forecast series delves into industry drivers influencing end-user spending on IT services within the industries covered, helping providers to better understand specific industries' needs, identify synergies, and develop growth strategies.

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