by Beth Bacheldor

The Outsourcing Market Is Looking Upbeat

Jan 19, 2010
IT Leadership

Analyst reports, quarterly earnings all point to brighter days.

This year, worldwide spending in the IT outsourcing market will grow by about 7 percent. So says Forrester Research, in its latest report, “U.S. And Global IT Market Outlook: Q4 2009.” I know, that sounds a tad dismal when remembering the days pre-recession, but heck, at this point I’m happy to see growth, no matter how single-digit it looks. Forrester’s report isn’t the only harbinger of good news. Others out there are also expecting upturns.

Market research and analysis firm Gartner said this week that while IT spending will be essentially flat in 2010, there is a small bit of growth when compared with 2009 levels where IT budgets fell 8.1 percent. Gartner says there appears to be some signs of recovery. Gartner’s predictions are based on a survey of about 1,600 CIOs during the middle of the fourth quarter 2009.

A look at earnings reports from the top Indian outsourcers also sheds some brighter light on the overall outsourcing market. Indian outsourcer Infosys reported last week that its revenue for the quarter ended Dec. 31 had grown by 5.2%, compared to the same quarter in the 2008 (profits, however, were pretty much flat). In the previous quarter, Infosys had posted a decline in revenue and profits. Infosys also revised its outlook for the current fiscal year ending March 31. At the end of the second quarter (ended Sept. 30, 2009), Infosys was anticipating 2009 revenues to max at about $4.62 billion, with a decline of as much as 1.3 percent from the year before. Now, Infosys is expecting 2009 revenues to come in at about $4.75 billion, with a growth of between 1.8 percent and 2 percent over last year. Time will tell how accurate that is, I suppose.

Tata Consultancy Services (TCS), another Indian outsource provider, had even better news. Beating estimates by Wall Street analysts, it reported a 33% rise in quarterly profit. Another of India’s leading outsourcers, Wipro, is expected to announce earnings Jan. 20.

As for outsourcing vendors here in the United States, IBM had good news. It reported Jan. 19 that its total outsourcing signings increased 15 percent (8 percent, adjusting for currency) to $11.4 billion.

Hopefully, this all adds up to a healthier outsourcing market in 2010. Of course, after the beating from 2009, I’m going to wait—and look forward to—seeing more good news in the next quarter.