Outsourcing fuels IT services boom

Companies and governments will spend over $663bn on external services worldwide in 2006, industry experts have predicted.

According to the latest data from IDC, this spending will represent moderate growth of 6.8 per cent from 2005.

The IDC study noted that outsourcing, in particular business outsourcing and application management services, continue to fuel the worldwide services industry.

On a regional basis IDC predicts that the Americas, particularly the US, will continue to host the majority of the services opportunity throughout the forecast period.

However, the fastest growing regions are Central Europe/Middle East/Africa, Asia/Pacific (excluding Japan) and Latin America.

The analyst firm predicts that worldwide spending on external services will increase at a five-year compound annual growth rate of 6.9 per cent during 2006-2010, ultimately reaching more than $866bn.

IDC believes that globalisation, standardisation and automation will reshape the growing worldwide services industry, and vendors will need to adopt new strategies to succeed amid these changes.

"The most significant examples include the globalisation of services delivery, the standardisation phenomenon in the software industry, and new technologies that drive the automation of services in both the consumption and internal delivery processes," said Sophie Mayo, director for Worldwide Services at IDC.

"The impact of the globalisation phenomenon on developing countries' economies, e.g. Brazil, Russia, India and China, is fueling opportunities for large global services players, but also for emerging players with new business models."

IDC recommends that successful services players need to focus on attracting and retaining talent, as talent management will increasingly become a key differentiator.

The analyst firm goes on to advise service providers to consider Brazil, Russia, India and China strategically and differently.

In addition to matching capabilities with the specific requirements of these countries, large players should also apply the lessons learned to serve all clients in a broad portfolio.