Study: Net demand will drive outsourcing to $165b

Companies that have finished year 2000 testing and remediation are now setting their sights on outsourcing, especially for internet and intranet management, according to a new report by Input, a market research firm.

The internet management segment of the outsourcing market will grow 76 per cent annually between 1998 and 2003 as companies adopt internet-enabled, wireless devices and require constant network upgrades to keep up with changing technology, according to the study.

"As internet rates of speed (affect) rates of technology change, clients are increasingly reluctant to undertake in-house migrations to upgraded architectures and applications," said Albert Nekimken, an Input senior analyst.

Also, more companies are turning to outsourcing now because they can afford it. As Y2K projects wind down, money can be redeployed to outsourcing projects, the study said.

Overall, the US market for information technology outsourcing will reach $165 billion ($US110 billion) by 2003, Input predicts. Some 24 per cent of the total will come from business process outsourcing, which is growing 29 per cent annually from $7.4 billion in 1998 to a projected $26.5 billion in 2003. Today, the banking, discrete-manufacturing and insurance industries lead the list of outsourcers. But Input predicts that outsourcing in telecommunications and utilities will grow faster, at more than 29 per cent annually.

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