The business and financial case for investing in IT outsourcing is strengthening due to the recession, according to experts.

EquaTerra, a business advisory company, says budget and employee cuts are increasing “pent-up” demand for IT outsourcing which is likely to result in more deals emerging in the latter half of the year.

“Outsourcing service providers have both a skills and cost advantage,” said Stan Lepeak, managing director of global research at the firm.

EquaTerra’s Pulse survey – conducted in the fourth quarter of 2008 – found that IT outsourcing remains popular among public sector and government enterprises, while over half of the service providers questioned forecasted demand will increase in the next quarter, up 14 per cent compared to the third quarter survey results.

Last week, data from analysts TPI showed that European IT outsourcing had a record year in 2008, with annualised contract value up to 14.1 billion euros (Ј13.2 billion), a 9.5 per cent rise compared to the previous year.