IDC Reveals Fastest Growth for IT Outsourcing Services Will Be in Government, Financial Markets, Services, and Discrete Manufacturing

FRAMINGHAM, MA – NOVEMBER 11, 2003 – The market opportunity for IT outsourcing services can differ significantly depending on the vertical industry, a new report from IDC reveals. The new report, which presents the five-year forecast for the U.S. IT outsourcing market within 16 vertical markets, indicates a range in the compound annual growth rate (CAGR) from 3.5% in communications/media and education to 7.4% in government.

While some verticals have been more severely impacted by the downturn in the economy, other industries have continued to spend on technology and related IT outsourcing. IDC’s research shows that the largest U.S. consumers of IT outsourcing are discrete manufacturers and the government. In terms of the fastest-growing markets over the five-year forecast period, some of the better opportunities will be with the government, financial markets, services, and discrete manufacturing industries.

“For the most part, outsourcing does not need to be ‘verticalized,’" said David Tapper, program manager for IDC’s IT Outsourcing and Utility Services research. “We tend to think about the need to verticalize an outsourcing offering as following an 80/20 rule – about 80% of an outsourcing offering is applicable to all vertical markets and about 20% needs to be modified for the specific needs of an industry.”

Key findings presented in this report include the following:

Service level agreements (SLAs) around security and high availability are two components of the IT outsourcing contract that often need to be adjusted to match the industry's sensitivity to uptime and security of information.

The scope of the outsourcing contract can vary by industry according to the type of IT infrastructure the industry has in place and what the industry is seeking to outsource. For example, outsourcing mobile devices is more important to the healthcare and auto industries than it is to the professional services or financial services industries.

Industries that are likely to outsource include those industries with low margins, poor access to IT talent, or a need to access the latest IT technology.

On-demand services are displacing traditional IT outsourcing contracts. A separate vertical assessment needs to be made for on-demand outsourcing services as the vertical market drivers for on-demand services vary from those of traditional IT outsourcing contracts.

IDC remains optimistic about the IT outsourcing marketplace, particularly after 2003. To leverage market opportunities, IDC believes IT outsourcers should develop service contracts that can support customers' needs to meet changing business requirements. In addition, as part of an outsourced offering, IT outsourcers need to provide offshore capabilities to ensure that they can cut costs and meet customer requirements. However, outsourcers need to align their offshore strategies with regulatory considerations and customer sensitivities to offshore preferences.

This study, U.S. IT Outsourcing Forecast and Analysis by Vertical Market, 2003-2007, (IDC #30269) presents the five-year forecast for the U.S. IT outsourcing market within 16 vertical markets. The purpose of this study is to identify recent trends that are influencing the IT outsourcing opportunities within vertical industries thus far in 2003 and discuss their impact on the five-year forecast period.

To purchase this document, call IDC's sales hotline at 508-988-7988 or email sales@idc.com.

For additional information about IDC’s IT Outsourcing and Utility Services research, please contact Beth Freedman at 508-935-4764 or email bfreedman@idc.com.

For information about IDC’s Vertical Research Services, please contact Virginia Lehr at 508-935-4188 or vlehr@idc.com.

About IDC

IDC is the premier global market intelligence and advisory firm in the information technology and telecommunications industries. We analyze and predict technology trends so that our clients can make strategic, fact-based decisions on IT purchases and business strategy. Over 700 IDC analysts in 50 countries provide local expertise and insights on technology markets. Business executives and IT managers have relied for 40 years on our advice to make decisions that contribute to the success of their organizations.

IDC is a subsidiary of IDG, the world’s leading technology media, research, and events company. Additional information can be found at www.idc.com.

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