IT Outsourcing Skyrockets Worldwide

Datamonitor released a report yesterday that reveals businesses worldwide increased their IT outsourcing efforts by an alarming 44 percent in 2003. Datamonitor's "IT Services Contract Tracker" reveals the number of deals worldwide with a value greater than $100 million increased 49 percent to 244. Those worth in excess of $1 billion more than doubled to 29. The EMEA (Europe, Middle East, and Africa) IT outsourcing market jumped 146 percent, from $23 billion in 2002 to $57.6 billion in 2003. The jump comes mostly from Europe as two of the largest clients came at the hands of the U.K Inland Revenue (the U.S.'s equivalent to the IRS) and the U.K National Health Service, says Nick Mayes, managing analyst for IT services at Datamonitor. The U.K. Inland Revenue signed a deal in December worth $5.1 billion with Cap Gemini Ernst & Young in December 2003, in what ranked as the year's largest single contract. The U.K. National Health Service, due to legislative pressures to modernize hospital IT infrastructures, aims to update patient record systems (medical histories of patients and their address information), implement electronic booking systems so patients can book appointments with doctors online, and create an informational file sharing system to enable hospitals to share patient information electronically. To do this the U.K. National Health Service awarded Accenture, British Telecom, and Computer Sciences Corp. each with contracts of $1.6 billion and up. "In Europe the big trend is in modernization. Governments are bringing in vendor services expertise from the private sector to modernize old systems. In the U.S. the big driver for growth is in defense, particularly in the Department of Homeland Security," Mayes says. It wasn't enough, however, to keep the North American market out of EMEA's shadow. For the first time, Mayes says, the EMEA market outgrew the North American market in IT outsourcing, which dropped from $55.3 billion in 2002 to $55.1 billion in 2003. Although it's getting a lot of press, Mayes says governments are not racing to send their business overseas to India and China: "To a certain extent a lot of companies have decided the cost of managing these deals overseas would be significantly high after travel costs are factored in. Also, offshore outsourcers sense it will be a lot tougher to crack the government sector, because things are a lot more visible there. It's a lot more open to public scrutiny."