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IDC: Outsourcing spending to double by 2003

Worldwide corporate spending on outsourcing corporate desktops and networks is expected to more than double within four years, according to a new report.

Kim Girard
Kim Girard has written about business and technology for more than a decade, as an editor at CNET News.com, senior writer at Business 2.0 magazine and online writer at Red Herring. As a freelancer, she's written for publications including Fast Company, CIO and Berkeley's Haas School of Business. She also assisted Business Week's Peter Burrows with his 2003 book Backfire, which covered the travails of controversial Hewlett-Packard CEO Carly Fiorina. An avid cook, she's blogged about the joy of cheap wine and thinks about food most days in ways some find obsessive.
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Kim Girard
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Worldwide corporate spending on outsourcing corporate desktops and networks is expected to more than double within four years, driven by the IT staff shortage and potential budget savings, according to a new report.

According to International Data Corporation (IDC), network and desktop outsourcing services grew almost $2 billion between 1997 and 1998 to reach $14.3 billion. By 2003, spending will reach $30.7 billion, the company predicts.

The firm says the challenges of managing servers, network environments, and desktops is fueling demand for outsourcing, one of the fastest-growing markets in the IT industry.

Under a desktop outsourcing deal a company typically hires a firm such as Wang or Unisys to procure its PCs, provide software licenses and systems upgrades, and supply help desk services from a call center. Network outsourcers include Hewlett-Packard and IBM.

Factors driving desktop and networking outsourcing growth are declining PC prices--which have increased computer use--skyrocketing employee Internet access, increasing portable device use, and difficulty hiring and keeping qualified IT staffers, according to the study's author, Richard Brewer, a program manager at IDC.

Tighter IT budgets provide a convincing argument for outsourcing, he added.

"The nice thing with outsourcing is it's easy to budget," Brewer said. "You say: AT&T [Solutions] will charge us $800 million to handle this many seats and contract for three or five or however many years. You can put [the number] on your books and depreciate it. You can eliminate all that budgeting chaos."

In 1998, the United States accounted for nearly half of worldwide spending on network and desktop outsourcing services, with the banking industry spending the most.

Latin America, as well as Eastern Europe, the Middle East, Africa, and parts of Asia, are other fast-growing areas, which are expected to increase their outsourcing spending at a compound annual growth rate of 20 percent and 21 percent respectively, IDC reported.