IS outsourcing grows in Canada by $350 million

The Canadian IS outsourcing services market increased by more than 11 per cent in 2002, translating into an increase of $350 million in that market, according to IDC Canada Ltd. in Toronto.

This data was part of an annual report on worldwide outsourcing that was issued in April by IDC Ltd., in Framingham, Mass., with Canadian data being contributed by IDC Canada’s Jason Bremner, senior analyst, outsourcing services.

IDC Canada predicts that little will change in the IS outsourcing industry for the next three years with the major players – IBM Global Services in Markham, Ont., EDS Canada in Toronto, and CGI Group Inc. in Montreal – retaining top spots. IBM Global Services currently holds the number one spot and will for the next three years, according to the report by Bremner, but potentially CGI could overtake EDS for revenue in 2002, once those final numbers are compiled.

“The Canadian IS outsourcing services market had an active year in 2002, with new contract signings, contract renewals, mergers, acquisitions and other industry developments reflecting resiliency in outsourcing demand relative to demand for other IT services,” Bremner said in a statement. “This trend was also indicative of the viewpoint held by vendors that outsourcing yields a steady, recurring revenue stream warranting increased business investment.”

Worldwide, the IS outsourcing market grew by US$68 billion in 2002 and is expected to reach almost US$100 billion by 2007, according to IDC; the American market accounted for 45 per cent.

However, in Canada big deals in 2002 included the acquisition by Hewlett Packard Co. (HP) of Intria-HP, a joint venture between it and the Canadian Imperial Bank of Commerce. Subsequently, CIBC also signed a seven-year, $2 billion infrastructure outsourcing contract with HP.

The industry leader, IBM, gained a 10-year, $700 million contract with Manulife Financial to manage the firm’s IT infrastructure including data centres, help desks, PC support and voice and data networks. In addition, Sun Life Financial signed on with IBM for a seven-year, $250 million contract to manage its mainframe and mid-range servers, to host its Web sites, support e-mail, Lotus Notes apps, and support network operations.

And while Big Blue, CGI and EDS hold the top three spots, CSC came in close behind, with a $1-billion, seven-year deal with Bombardier Transportation to support its rail equipment and services operations at 200 of its worldwide locations. The agreement includes managing its desktops, help desks, call centres, data centres, and network and application management services.

While CSC approached the top three, Bremner said in a statement that its marketshare is likely to fall over the next three years due to its contract with Nortel Networks that will reduce by $50 million in 2002.