Over $746 Billion for Service Vendors in 2008: IDC
In spite of persisting harsh economic conditions in the world, service providers are going to gain. Research firm IDC has revealed that companies and government agencies will spend more than $746 billion on external services in 2008, representing a growth rate of 6.8% over 2007. Despite – and in some cases because of – a weak U.S. economy, there are many market forces driving enterprises to continue to turn to service vendors for assistance.
Additionally, increased customer use of new and often disruptive delivery options (like hosting, SaaS, and utility computing) will encourage service providers, especially outsourcers, to focus their investments in these areas.
These are the findings from the report: The IDC study, Worldwide Services 2008-2012 Forecast: Finding Opportunities in a Challenging Time.
Other key trends from the IDC report include:
- Though representing the smallest outsourcing market, the hosted application management (AM) is expected to grow the fastest at a five-year compound annual growth rate (CAGR) of 15.9%, followed by business outsourcing services at 10.4%.
- In 2007, IT services continued to represent the lion’s share (74%) of the overall services market. But the business services market that IDC tracks is slowly catching up, with a much faster CAGR of 9.6% compared with the IT services market’s CAGR of 5.6%.
- Service providers continue to aggressively pursue a geographic expansion strategy to increase their footprint across the globe. While service vendors based in the United States and Western Europe are focusing on building their presence in the emerging markets, service companies based in those geographies are expanding into Europe and the United States.
- The growth of outsourcing of non-core processes and the adoption of service-oriented architecture (SOA) are prompting enterprises to shift toward tighter alignment of business and technology. Although such an alignment is critical, it is still not enough. Ultimately, organizations will seek to eradicate any distinction or separation between IT and business in order to obtain convergence between them.
- IDC expects that new types of partnerships along with an expanded ecosystem will increase in importance as service vendors seek to deliver best-of-breed offerings and full-service capability at the lowest cost.
- Vendors need to take active steps to provide higher-value-added services and innovation to their clients.
IDC estimates that the worldwide services spending will surpass $965 billion by 2012 and it’s expected to further grow to a trillion-dollar market.