IT Outsourcing Growth To Slow Down Ahead

IT outsourcing growth is on the rebound but it is unlikely that it will ever be the same again. After the big boom that the industry experienced a few years ago before the recession, analysts estimate that this is unlikely to happen again.

In a study released by company Forrester Research (NASDAQ:FORR), the company surmised that IT outsourcing growth is likely to slow down as the economy recovers from the recession. The mega deals of old are now gone and whatever mega deals that do come, no longer impact the industry as much as it used to.

India, the current IT outsourcing hub, has been cited by Forrester analyst Andrew Bartels as in need of an evolution, from being IT outsourcers to software producers if they desire to be more competitive in the future. He further urged vendors such as Tata Consultancy Services (NSE:TCS), Infosys (NASDAQ:INFY) and Wipro (NYSE:WIT), to “take their development activities from systems integration projects and turn that into software that can be reused or potentially sold to new clients with much better leverage and much better margins.”

For this year, Forrester research predicts a 9.3% growth in IT spend to $1.5 trillion. Fellow research company, Gartner (NYSE:IT) has a lower forecast, pegged at 5.3%. Meanwhile a commissioned study by IT solution company, Savvis, Inc. (NASDAQ:SVVS) predicts IT infrastructure to increase globally from 17% to 64% in the year 2020.

Just a few days ago in the IT outsourcing space, IT services provider HCL Technologies (NSE:HCLTECH), announced that they are shifting focus onto the Brazilian market in order to “expand and strengthen its breadth of infrastructure services in the market.” Meanwhile Capgemini’s (EURONEXT:CAP) Canadian subsidiary received an extension of contract from Hydro One Networks, Inc. worth $650 million until 2015. The contract includes providing IT outsourcing services, aside from business process outsourcing and core system support.

Author: Audrey B.