IT Outsourcing is Down and Barely Going Up

Forrester Research just revised its U.S. information technology market outlook forecast, from the 9.9 percent growth it estimated in July to 8.1 percent for the remainder of 2010. The technology research firm estimates 7.4 percent growth in the United States in 2011. Globally, the tech market will grow by 7 percent, compared with Forrester’s July forecast of 7.8 percent.

Forrester analyst Andrew Bartels writes in his blog that—much like the economy—the tech market’s outlook is murky (and he adds that he believes the economy is the best indicator of how the tech market will perform).

But Bartels also characterizes the tech market as “robust.” And by the looks of Forrester’s numbers, I’d agree. Except for…er, um… IT outsourcing. According to Forrester, U.S. computer equipment will grow 19 percent in 2010 and U.S. software purchases will rise by 9.1 percent (with operating system software, middleware, and applications sharing the growth). Communications equipment purchases will go up by 5.5%. U.S. IT outsourcing services, however, will go up a mere 2.8 percent.

Interestingly, IBM’s third quarter earnings this week, while not horrific (the vendor beat expectations), weren’t what investors wanted to hear. IBM blamed its less-than-stellar performance on (you guessed it) a shortfall in outsourcing deals. For what it’s worth, IBM did sign one large outsourcing contract that would have impacted overall outsourcing sales, but it was signed about a week too late. According to an IBM press release, outsourcing signings were $5.7 billion, down 14 percent, adjusting for currency. Had the new deal (signed on Oct. 8) counted, IBM would have reported outsourcing signings growth of 14 percent, adjusting for currency. This would have increased total signings reported from $11 billion to $12.7 billion.

So, in light of all this “downer” news about the IT outsourcing market, let me know what you think. Do you. What’s behind the slow growth?

Source: CIO

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