Web management to lead outsourcing growth

As companies scramble to launch e-commerce sites or link all aspects of their business through the Web, many are finding they don't have the skills or resources to keep up with technology changes or scalability demands.

So, many information technology departments are outsourcing Internet management functions such as Web hosting or building Web interfaces to back-end systems.

Internet management outsourcing will grow 76 percent annually between 1998 and 2003, according to a study by market research firm Input in Mountain View, California. That dwarfs the 22 percent annual growth expected in the overall US outsourcing market, which will reach $US110 billion by 2003.

The second fastest-growing segment, business process outsourcing, is expected to grow 29 percent annually, the study said.

"Companies can't afford to spend x amount on hardware and take the risk that in a short period of time, it's inadequate," said Albert Nekimken, an Input analyst and author of the study. "It's much safer to hire an outsourcer who can service your needs."

Telecommunications and utility companies in particular are seeking outside help for Internet management, Nekimken said. Faced with deregulation and a push toward Internet billing and customer service, the market for Internet management outsourcing will grow 33 percent annually in the telecommunications industry and 29 percent annually in the utilities industry, the study said.

"Virtually every one of our proposals is exploring the option of outsourcing," said John Berry, a vice president at AppNet, a Bethesda, Maryland-based Internet services company. Large customers are looking to outsource their electronic operations from soup to nuts - from Internet data centers, Web hosting and integration to back office, fulfillment and inventory systems. "It shields companies from relentless technology upgrades," he said.

International Data Corp. (IDC) in Framingham, said it expects the outsourcing market to grow at just 13 percent annually. It hasn't separated Internet management from other types of IT outsourcing. But analyst Cynthia Doyle said the segment is likely to take off. "A lot of companies know if they don't get in the game, they're going to be left behind. If they don't have the expertise, they'll have to outsource it," she said.

IDC expects corporate Internet spending to grow 39 percent per year through 2002.