Government leads outsourcing investment

Government agencies, financial institutions, discrete manufacturing companies and service businesses are set to become the fastest growing market for IT outsourcing.

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By  Greg Wilson Published  November 16, 2003

Government agencies, financial institutions, discrete manufacturing companies and service businesses are set to become the fastest growing market for IT outsourcing in the US.

According to IDC, the opportunity for IT outsourcing services will differ significantly depending on the vertical industry.

The report highlights the varying compound annual growth rate (CAGR) from industry to industry. For instance, the communications/media and education industries registered 3.5% growth, while government racked up 7.4%.

Although some verticals have been more severely impacted by the downturn in the economy, other industries have continued to spend on technology and related IT outsourcing. Currently, government and discrete manufacturing are the largest consumers of outsourcing services.

“For the most part, outsourcing does not need to be ‘verticalised,’” comments David Tapper, program manager for IDC’s IT Outsourcing and Utility Services research.

“We tend to think about the need to verticalise an outsourcing offering as following an 80/20 rule — about 80% of an outsourcing offering is applicable to all vertical markets and about 20% needs to be modified for the specific needs of an industry,” he adds.

According to IDC, the industries most likely to turn to outsourcing service providers are those faced with low margins, poor access to talent, or the need to deploy the latest technologies.

Also, on-demand services are displacing traditional IT outsourcing contracts.

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