Users are negotiating better outsourcing deals than a few years ago, while suppliers are more willing to share risks with their customers, shifting the balance of power to the customer.
According to a new survey into the western European market by IDC, outsourcing is still growing, despite much publicised disasters suffered by some large organisations over the past two years. But smaller deals are favoured now. According to IDC, corporate spend on outsourcing in western European reached $22.7 billion last year and is expected to grow to $33.6 billion by 2001.
"Not only does the European market currently represent 26 per cent of the total worldwide outsourcing market, recent research found four out of the top 10 worldwide outsourcers are European companies," said Mirko Lukacs, a senior IDC analyst.
Although the UK was the first European nation to embrace outsourcing, mainly because of the privatisation of many public services, companies from Germany, France, Italy and Spain are now signing more deals.
"Over the next five years, growth in the UK will be below the European average, and the above average growth will be in the Netherlands, Norway and Germany," said Lukacs.
IDC separates outsourcing into three types: business process outsourcing, where companies hand over the running of the entire IT infrastructure and the business processes it supports; information systems, where suppliers manage a company's mainframe system; and processing services, which includes the outsourcing of transaction processing functions.
The largest growth area (23 per cent over five years) will be business processing which accounted for 3.4 per cent of the overall market last year. Information systems processing, which currently accounts for 29 per cent of the market, will grow by 9.5 per cent, while processing services, which command two-thirds of the market, will grow by 6.6 per cent over five years.
Said Lukacs: "Users are getting smarter and more experienced at outsourcing and they are doing this selectively. They are demanding higher service level agreements - they want more control."
Also suppliers are willing to assume more responsibility and share the risks of outsourcing, he continued.
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