Growth returns to agenda for IT outsourcing providers

7 Sep 2011

Growth is back on the agenda for IT outsourcing (ITO) providers, and identifying growth is the top strategic goal this year for 62pc of respondents to a survey by Gartner, Inc. This includes aggressive marketing plans and investments in cloud, utility and “as a service” offerings.

“It is clear that providers are optimistic despite considerable uncertainty in the global economies,” said Rolf Jester, vice-president and distinguished analyst at Gartner.

“However, we predict the ITO services market will reach $313.2bn in 2011, a growth of 6.9pc from 2010, and will reach 4.6pc compound annual growth rate through 2015.”

Q1 online survey

Gartner conducted an online survey in the first quarter of 2011 among 47 ITO providers, accounting for 62pc of the total ITO market. The respondents represented the full range of providers, all major geographies and all types of ITO services, including infrastructure (data centre, desktop, storage and network), applications and cloud services.

“Many ITO providers are intending to commit serious marketing funds and target new accounts to outgrow the market,” said Bryan Britz, research director at Gartner.

“The survey found that at least 50pc of outsourcing providers said they’ll be spending 2-5pc of revenue on marketing in 2011, which is higher than the historical norm for marketing expenditure as a percent of revenue (which has tended to be 1-3pc for IT services providers). At the same time, ITO providers continue to invest significantly more in sales than marketing as demonstrated by two-thirds of providers indicating sales expenses are greater than 6pc of revenue,” Britz added.

Wanted: new clients

With growth on the agenda, ITO providers will prioritise the pursuit of new clients. Forty-five per cent of all ITO providers indicated that winning new clients is the priority for 2011. At the same time, they recognise that the bulk of this year’s actual revenue growth will continue to come from existing accounts. Overall, between 66-70pc of expected growth in 2011 will be generated by existing clients.

In terms of the ITO providers’ strategy on delivery models (such as utility services, cloud services and “as a service”), the survey found that broadly defined “cloud” investments are priorities for 2011, especially investments in infrastructure utility or Infrastructure as a Service, but also private, community or government cloud services and Software as a Service. Between 60-64pc of providers nominated cloud investments in the top three ITO investment priorities for 2011.