Soaring sourcing

International Journal of Productivity and Performance Management

ISSN: 1741-0401

Publication date: 1 July 2004

Citation

(2004), "Soaring sourcing", International Journal of Productivity and Performance Management, Vol. 53 No. 5. https://doi.org/10.1108/ijppm.2004.07953eab.011

Publisher

:

Emerald Group Publishing Limited

Copyright © 2004, Emerald Group Publishing Limited


Soaring sourcing

The IT outsourcing market was worth $119 billion last year, almost double that of 2002. Datamonitor, the industry analyst, identifies this growth as being fuelled by some very large deals in both the private and public sectors. For example, both the UK NHS and the US Department of Defence have outsourced all or part of their new technology infrastructures.

The number of large projects continues to grow, with the number of global contracts worth more than $1 billion doubling in the past year. Contract failure has not deterred some organisations, with the UK Inland Revenue signing a $5.1 billion deal with Cap Gemini Ernst and Young shortly after coming out of a heavily criticised contract with EDS.

Nick Mayes, managing analyst for global computing services at Datamonitor, commented: “There was a big surge in the number of mega deals last year. But the majority of them will not be as profitable for the service providers as those long-term contracts that they signed in the 1990s, as it has become a buyer’s market. Clients have been able to squeeze some big cost reductions out of their incumbent suppliers, which are also being held to increasingly tight performance targets”.

The use of offshore outsourcing saw spectacular growth of 890 per cent last year but it is still a niche delivery mechanism in relation to global outsourcing. Just over 1 per cent of the $114 billion outsourcing spend was accounted for by offshore work, tallying up to $1.66 billion of business.

IBM Global Services got the biggest slice of the IT services outsourcing pie last year, with a 21 per cent take, with Computer Sciences Co. and Hewlett-Packard seeing significant growth.