U.S. Outsourcing Growth Outpaces Global Rate

Growth in global IT outsourcing is slowing more than previously thought, according to Gartner. The researcher expects a 2.8 percent increase, to $288 billion, in the global outsourcing market in 2013, and a 5.4 percent compound annual growth rate through 2017.

EarthHowever, for North America Gartner puts the growth rate at 8 percent this year and sees a 6 percent CAGR through 2017, largely because of infrastructure-as-a-service, hosting, and co-location deals.

Cloud computing has a lot to do with it, as it takes business away from traditional outsourcers and pressures the price of IT services. Consequently, IT service providers are making price concessions and signing or renewing only the most profitable deals, according to CIO.com.

One indication of outsourcing’s slowing growth is reduced hiring by major Indian outsourcers. The Indian IT trade organization NASSCOM has said their hiring may be down as much as 17 percent as low-level tasks are automated and attrition declines.

The Indian services business “is hurtling toward commodotization,” says HfS Research. It says the top five firms  — Cognizant, TCS, HCL, Infosys and Wipro – have to make radical changes in their search for new sources of growth. Previously, the researcher suggested that offering automated services might be one approach.

According to its blog:

It’s no longer going to be all about … programmers, help-desk jockeys and accounts payable clerks. The next round of winners will be those who can re-invent their clients’ business process to work around SaaS platforms such as Workday and NetSuite; who can recreate an organization’s entire approach to managing and analyzing its data; who can become genuine partners to both their clients’ front and back offices; who can consult, think, act and create for their clients.