Gartner Survey Reveals that Organic Growth Is Top Priority for IT Outsourcing Providers in 2011

Analysts to Examine Cloud Services at the Gartner's Outsourcing Summits 2011, 12-14 September in Orlando and 26-27 September in London
(PresseBox) (Egham, UK, ) Growth is back on the agenda for IT outsourcing (ITO) providers, according to a recent survey by Gartner, Inc. Sixty-two per cent of respondents identified growth as the top strategic goal this year, with aggressive marketing plans and investments in cloud, utility and "as a service" offerings.

"It is clear that providers are optimistic despite considerable uncertainty in the global economies," said Rolf Jester, vice president and distinguished analyst at Gartner. "However, we predict the ITO services market will reach $313.2 billion in 2011, a growth of 6.9 per cent from 2010, and will reach 4.6 percent compound annual growth rate through 2015."

Gartner conducted an online survey in the first quarter of 2011 among 47 ITO providers, accounting for 62 per cent of the total ITO market. The respondents represented the full range of providers, all major geographies and all types of ITO services including infrastructure (data centre, desktop, storage and network), applications and cloud services.

"Many ITO providers are intending to commit serious marketing funds and target new accounts to outgrow the market," said Bryan Britz, research director at Gartner. "The survey found that at least 50 per cent of outsourcing providers said they'll be spending 2 to 5 per cent of revenue on marketing in 2011, which is higher than the historical norm for marketing expenditure as a percent of revenue (which has tended to be 1 per cent to 3 per cent for IT services providers). At the same time, ITO providers continue to invest significantly more in sales than marketing as demonstrated by two-thirds of providers indicating sales expenses are greater than 6 per cent of revenue."

With growth on the agenda, ITO providers will prioritise the pursuit of new clients. Forty-five per cent of all ITO providers indicated that winning new clients is the top priority for 2011. At the same time, they recognise that the bulk of this year's actual revenue growth will continue to come from existing accounts. Overall, between 66 per cent and 70 per cent of expected growth in 2011 will be generated by existing clients.

In terms of the ITO providers' strategy on delivery models (such as utility services, cloud services and "as a service") the survey found that broadly-defined "cloud" investments are top priorities for 2011 - especially investments in infrastructure utility or infrastructure as a service, but also private, community or government cloud services and software as a service. Between 60 and 64 per cent of providers nominated cloud investments in the top three ITO investment priorities for 2011.

Gartner also asked providers to identify the percentage of ITO deals that will include delivery models as part of the contract. Overall ITO providers are realistic about their expectations for cloud deals in the current year and in 2012. The average percentage of deals expected to include cloud services and utility services or "as a service" delivery models is 18 per cent for data centre deals in 2011, growing to 24 per cent in 2012.

However, ITO providers are conservative in their views of how the cloud phenomenon will affect their ITO deals by 2015. Only 34 per cent of respondents said that their data centre ITO deals will incorporate cloud/utility/as-a-service by 2015, but 26 per cent don't believe they will be involved in any of these deals.

Similarly, the growth implications from cloud-based services evoke mixed reactions among ITO providers. Fifty-six per cent of ITO providers expect these alternative delivery models will drive overall ITO revenue growth by 2015, while 29 per cent believe it will essentially cannibalise some ITO revenue.

"There is no going back to business-as-usual for ITO providers," said Allie Young, vice president at Gartner. "Traditional business models are being turned inside out: it has started with the new business models and cloud ecosystem, and these trends will continue to impact the outsourcing business. "Providers that ignore those trends could find themselves stuck with yesterday's delivery models and high cost structures as the market moves on around them."

For additional information, see the Gartner report "Market Insight: Your IT Outsourcing Competitors Are Aiming for Growth, and So Should You," available on Gartner's website at http://www.gartner.com/....

The broader series of reports related to Gartner's findings from the IT Outsourcing vendor survey are also available on Gartner's website. They include:

"Vendor Survey Analysis: Competitive Comparisons, IT Outsourcing Contracting and Sales Performance, 2011": www.gartner.com/resId=1752220.
"Vendor Survey Analysis: Competitive Comparisons, IT Outsourcing Growth Initiative Priorities, 2011": http://www.gartner.com/....
"Vendor Survey Analysis: Competitive Comparisons, IT Outsourcing Profitability, 2011": http://www.gartner.com/....
"Vendor Survey Analysis: Competitive Comparisons, IT Outsourcing Staffing Effectiveness and Strategies, 2011": http://www.gartner.com/....
"Vendor Survey Analysis: Competitive Comparisons, Utility Services, Cloud Services and 'as a Service' Portfolio Strategies, 2011": www.gartner.com/resId=1752219.

Gartner analysts will discuss the adoption of cloud services at the Gartner Outsourcing & Vendor Management Summit 2011, 12-14 September in Orlando and the Gartner Outsourcing & IT Services Summit 2011, 26-27 September in London.

About Gartner's Outsourcing Summits 2011

The Summits represent an intensive program designed to prepare outsourcing professionals for the next economic cycle and develop new approaches to service aggregation and management. Gartner analysts will provide practical guidance to help organisations advance their sourcing strategy and governance competencies in order to deliver more business value. In addition, Gartner analysts will help organisations understand the options for cloud services and evaluate their readiness to adopt them.

Additional information about the Summit in Orlando is available at http://www.gartner.com/... Members of the media can register for the event by contacting Christy Pettey at christy.pettey@gartner.com.

For more information about the Summit in London, please visit www.europe.gartner.com/.... Members of the media can register by contacting Laurence Goasduff at laurence.goasduff@gartner.com.

Additional information from the event will be shared on Twitter at http://twitter.com/... using #GartnerOut.

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