Worldwide IT Outsourcing Market Grew 7.8% in 2011: Gartner

Worldwide IT outsourcing (ITO) revenue totalled $246.6 billion in 2011, a 7.8 percent increase from 2010 revenue of $228.7 billion, according to Gartner, Inc. Indian-based IT services providers and providers rooted in cloud-based services delivered the highest growth rates in 2011.

“Revenue cannibalisation resulting from client adoption of industrialised, and often cloud-based, services risks muting the growth opportunities for the ITO providers that are heavily weighted in infrastructure outsourcing,” said Bryan Britz, Research Director, Gartner. “Strategies will vary as clients are likely to pursue hybrid cloud strategies requiring providers to deliver some asset-light and some asset-heavy offerings — which will result in varying growth trajectories among competitors over the next several years.”

IBM’s revenue grew 7.8 percent, and it accounted for 10.9 percent of ITO revenue. IBM was the No. 1 ranked provider in all regions. HP grew below the market growth rate, but retained the No. 2 worldwide market share position with 6.1 percent market share. Fujitsu, helped by currency gains, overtook CSC for the No. 3 worldwide market share position in 2011.

Forty-three providers booked 2011 revenues of $1 billion or more. This group of providers collectively grew by 9.5 percent during 2011. After excluding India-based IT services providers, cloud-centric providers, and providers that made sizable acquisitions during the year, the remaining group of large ITO providers grew by only 6.5 percent during 2011.

“For many leading providers in the ITO market, 2011 revenue results demonstrate how challenging simply maintaining a market share position has become, much less gaining share — and this challenge is likely to worsen over the next few years for providers that do not address these forces,” Britz said. “The challenges are likely to spur consolidation to augment growth, posing risk to the consolidators, because acquisitions have been a challenge in the IT services market.”