Gartner Survey Shows Outsourcing Activity in Europe Is Growing During Economic Downturn

Analysts Examine Outsourcing Trends at Gartner Outsourcing & IT Services Summit 2009, 15-16 June, London

Egham, UK, May 6, 2009 —

Almost 60 per cent of organisations in Western Europe will outsource more IT and business process functions in 2009, while renegotiation of existing contracts will rise to more than 60 per cent, according to a recent survey from Gartner, Inc. 

“The outsourcing market’s growth has slowed from 2008, but today’s market is characterised by a high volume of activity across the board,” said Claudio Da Rold, vice president and distinguished analyst at Gartner. “For many clients, these outsourcing contracts very often include offshore work and intense renegotiations. Last year, the activity was primarily concentrated on renewals and new deals.”

The online survey was conducted among 116 companies across Western Europe during the last week of November 2008 and the first week of December 2008. The survey was directed to individuals who were involved in decision making on outsourcing and IT services in 2009.

This survey showed that organisations are increasingly relying on outsourcing to achieve cost optimisation. More than 70 per cent of respondents rated budget and cost containment as their top concern in 2009, up 17.5 per cent from 2008.

“The focus on cost reduction is driving a high usage of outsourcing and global delivery in Europe in 2009 and 2010. However, under the current economic and technological conditions prices are going to decrease, creating a market full of opportunities and challenges for both end-users and external service providers,” Mr Da Rold. Gartner anticipates prices of IT services outsourcing to decline by 5 per cent to 20 per cent through 2010.

In addition, the survey found that more organisations (36 per cent, up 10 per cent from 2008) are in the initial stage of their next outsourcing endeavour, with no plans yet (10 per cent), establishing their outsourcing strategy (20 per cent), or starting the implementation or selecting the provider (6 per cent).

“Some inexperienced organisations that are driven into outsourcing to achieve rapid cost reduction may create another wave of unsatisfactory outsourcing contracts, a situation that happened in the 2001-2002 economic downturn,” said Mr Da Rold. “This must be avoided in such an uncertain business climate as the inflexibility of bad outsourcing relationship can seriously harm business viability.” Gartner predicts that through 2012, inflexibility caused by an excessive cost reduction focus results in business disruption in 30 per cent of outsourcing deals, including the inability of the buyer to compete effectively.

Regarding the type of outsourcing and services that European organisations are looking for, the respondents showed an increased interest in alternative delivery and acquisition models (ADAMS) such as infrastructure utility (IU), software as a service (Saas) and cloud computing among others. “Interest among European organisations is growing fast, as well as adoption rates that are already in the range of 30 per cent, with plans to ramp up to 50 per cent through 2010 *, indicating the requirement for more efficient, better, faster and less expensive IT solutions,” Mr Da Rold added.

Additional information is available in the Gartner report “European Outsourcing and Services Survey Reveals Client Organisation Priorities for 2009.” The report is available on Gartner’s website at http://www.gartner.com/DisplayDocument?ref=g_search&id=903017&subref=simplesearch

Gartner analysts will further discuss outsourcing and IT services trends at the Gartner Outsourcing & IT Services Summit 2009 held in London, 15-16 June. The Summit provides a comprehensive view of the entire outsourcing market — infrastructure, application and business process outsourcing, global delivery, and the use of offshore providers, as well as issues and trends about new delivery models, such as SaaS and cloud computing. For complete event details on these events, please visit:www.europe.gartner.com/outsourcing. Members of the media can register for the Summit by contacting Laurence Goasduff atlaurence.goasduff@gartner.com

*Notes to editors
From October through December 2008, Gartner conducted an e-mail-initiated, web-based survey of 310 European participants based in four countries (Germany, the Netherlands, Sweden and the UK). Respondents were asked which alternative delivery models their organisation is currently using, plans to use in the next 24 months, has no plans to use within the next 24 months but would consider in the future, or has no plans to use at this time.

 

Contact:


Holly Stevens
Gartner
+44 0 1784 267412
holly.stevens@gartner.com


About Gartner:
Gartner, Inc. (NYSE: IT) is the world's leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, Gartner is the indispensable partner to 60,000 clients in 10,000 distinct organizations. Through the resources of Gartner Research, Gartner Consulting and Gartner Events, Gartner works with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,000 associates, including 1,200 research analysts and consultants in 80 countries. For more information, visit www.gartner.com.