Outsourcers are cherry-picking the contracts they want to work on.
"Customers have not realised that suppliers are evaluating and choosing who they'll work for," Dataquest vice president, Roger Fulton, told delegates at the researcher's annual conference in Amsterdam this week.
"We know [services] suppliers that are refusing to go on the shortlist for some projects. The successful ones have identified the markets they want to address - down to the names of the key clients they want to do business with," he added.
The skills shortage and the accelerating pace of technological change are among the factors driving a "rapid change in the European IT services market", he said. "Internal IT looks like a zero-growth marketplace. Over the next 10 years, money spent externally will far exceed money spent internally."
UK spending on non-maintenance IT services totalled about $38 billion last year. By 2004 the annual spend will be more than $70 billion, representing a compound annual growth of more than 15 per cent. By then professional services will account for 35 per cent of the worldwide spending on outsourced IT services, compared with just 25 per cent last year.
"Outsourcing will become a business-critical capability," Fulton warned.
"Service suppliers will say to themselves: 'If we can't be sure a customer is good at buying and managing services, we can't sell to them'."
"Customers will no longer be able to say, 'I have a big problem and I want to give it to you'," he added.
'Second generation' outsourcing contracts will be needed to maintain good relations. These will run for months rather than years - "because IT has become like watching a video on fast forward" - and will spell out arrangements for auditing, risk analysis and reporting. IT departments must also realise that vendors want "ongoing relationships, not just with the purchasing manager but with the managing director as well. It's about communication".
The increasing workload will force outsourcers to subcontract work among themselves.
Fulton referred to last year's landmark outsourcing contract between IBM and Cable and Wireless Communications (CWC). IBM took responsibility for the bulk of CWC's IT operations, and the UK communications giant provided IBM with networking services in return. "Service companies are gradually becoming not very self-sufficient. IBM typically contracts out 30 per cent of its work," he said.
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