Outsourcing market set to hit $20b

The IT services outsourcing market is set to explode in the Asia-Pacific region and will be valued at almost $20 billion by 2004, according to IDC.

This is up from the 1999 figures of $9 billion and shows a trend by Australian companies to outsource in a bid to control network and desktop systems so the focus can remain on core competencies.

IDC's outsourcing analyst Kathy Beckman said IS outsourcing and custom application development were the two largest growth categories in 1999.

However, Beckman said application outsourcing and network infrastructure management services will have the highest growth rates among all outsourcing service categories for the next five years.

Australia represented the largest proportion of regional outsourcing spending in 1999 at an estimated 54 per cent with New Zealand following at 14 per cent.

"Under pressure to achieve superior financial and customer satisfaction combined with a deluge of network, desktop and operational demands, companies are moving to outsourcing noncore IT services not merely as an option but as standard business practice," Beckman said.

"An increasing number of vendors will try to capitalise on this changing paradigm, and competition will be fierce because it is difficult to differentiate offerings in this market."

Phil Hassey, of IDC's services analyst team, said outsourcing will continue to increase as companies struggle to restructure around e-business, compete in the Internet market and contend with economic factors like globalisation, privatisation, deregulation, and technology innovations.

"The long tradition and expertise of Australian service providers in giving clients innovative and cost effective outsourcing services will need to be adapted to the Asia-Pacific region to ensure significant opportunities for revenue growth," he said.

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