IT services growth predicted

The global information technology (IT) services market is forecast to surpass US$707 billion by 2007, recording a compound annual growth rate (CAGR) of 5.7 per cent, according to research firm Gartner Inc.

The primary drivers for growth will be spending by governments, manufacturing, communications, and financial services, Gartner announced recently at its Summit India 2003.

The highest growth in spending on IT services will be witnessed by the Asia Pacific (APAC) region at 9.5 per cent CAGR from 2003 to 2007, followed by Eastern Europe, Middle East and Africa, Japan, Latin America, North America, and finally Western Europe, according to Gartner. Within APAC, the Indian and Chinese markets will experience maximum growth.

Gartner described offshore outsourcing as the world’s fastest growing IT industry segment. From 2002 through 2007 offshore IT services is expected to have a CAGR of 29 per cent, while offshore business process outsourcing (BPO) is forecast to have a CAGR of 68 per cent, according to Gartner.

The market for IT services is getting competitive, even for leading outsourcing locations like India. “Application development and maintenance has long been the stronghold of Indian IT service providers, but increasingly, due to low entry barriers, providers from other developing countries are actively pursuing such offshore provisions,” said Craig Baty, chief of research of Gartner’s Global IT Management Sector.

In a recently concluded user study, three engagement models were evaluated on parameters such as direct cost, indirect cost, productivity losses cost and risk/convenience cost. The results indicated that for a U.S.-based customer, cost could be significantly lower when processes were outsourced to a near-shore destination like Mexico rather than to an offshore destination like India, under certain circumstances.