IT outsourcing services to grow fastest in Asia

Global spend to reach US$251.7 billion this year, with Asia-Pacific region to see highest growth though Europe sovereign debt issues and China's slowing exports may have impact.

Global spending on IT outsourcing (ITO) services is set to reach US$251.7 billion this year, increasing 2.1 percent from US$246.6 billion in 2011, with the Asia-Pacific region expected to see the highest growth.

According to figures released by Gartner on Tuesday, ITO spending in Asia-Pacific will grow 1 percent in U.S. dollars in 2012 and exceed 2.5 percent growth in 2013. Other than Japan, Australia, New Zealand, Singapore and Hong Kong, markets in the Asia-Pacific region are relatively new in terms of outsourcing usage, understanding and sophistication, the research firm said. 

Growth here is driven by the large inflow of capital in Asia over the past three to five years, spurring the need among global and regional businesses to scale up their operations. There may, however, be some impact from the ongoing business slowdown due to the sovereign-debt issues in Europe and slowing exports in China , Gartner noted.

In terms of the fastest-growth segment within ITO, the research firm pointed to cloud compute services--part of the infrastructure as a service (IaaS) segment--which is expected to grow 48.7 percent in 2012 to US$5 billion, up from US$3.4 billion in 2011.

Gregor Petri, research director at Gartner, said in the report: "Today, cloud compute services primarily provide automation of basic functions. As next-generation business applications come to market and existing applications are migrated to use automated operations and monitoring, increased value in terms of service consistency, agility and personnel reduction will be delivered." 

However, privacy and compliance concerns may negatively impact growth in some regions, especially if providers are slow in bringing localized products to market, Petri warned.

Datacenter outsourcing (DCO), while a mature segment representing 34.5 percent of the overall ITO market last year, will decline by 1 percent this year.

DCO is at a major tipping point, with various datacenter processing systems gradually replaced by new delivery models through 2016, explained Bryan Britz, research director at Gartner. These new services enable providers to address new categories of clients, extending DCO from traditional large organizations into small and midsize businesses (SMB), Britz added.

According to Gartner, the application outsourcing (AO) segment is expected to hit US$40.7 billion, a 2 percent increase from 2011's spending of US$39.9 billion. This growth reflects enterprises' need to manage extensive legacy application environments and commercial off-the-shelf packages which run the business, it said.

Britz said enterprise buyers are now cautious with the burden of managing the legacy portfolio and limitations of IT budgets, and prefer a more evolutionary approach to other application services, such as software-as-a-service (SaaS).

New applications will be largely packaged or SaaS-deployed to extend and modernize the portfolio in an incremental manner, he noted. While custom applications will stay important for many organizations, the trend over the next few years to SaaS-enablement in the cloud will be reflected in the AO growth outlook, he said.