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Leader: Outsourcing ends year on a high
And there's more...

By silicon.com

Published: Thursday 18 December 2003

December has been something of a defining period for outsourcing this year with a raft of major deal announcements and significant developments in the bidding process for others.

First the winners: the widely predicted trend towards offshore outsourcing to places like India is gaining huge momentum despite the thorny political issue of moving jobs abroad and the potential for a customer backlash.

Recent deals include insurance group Aviva's decision to ship 2,500 Norwich Union jobs to India next year, and silicon.com's discovery this week of Barclays' plans to move hundreds of jobs to India as part of a £450m outsourcing deal with Accenture.

Then in the public sector we have had the Inland Revenue's brave decision to ditch its current supplier EDS for Cap Gemini Ernst & Young in a £3bn 10-year deal, while further NHS contract announcements are due before the end of the year. The MoD also moved on with its £4bn IT outsourcing project, revealing the final three bidders to progress to the next phase.

The flurry of contract announcements will, in large part, be down to the bean counters who want to get deals finalised before the end of the financial quarter and will be a huge boost to the IT industry. Certainly Accenture, CSC and CGEY look better for their recent wins.

But it won't be such a happy Christmas over at EDS, which lost the Revenue contract, and IBM Global Services, which lost out – again – at Barclays, the MoD and the NHS, although IBM did still manage to close $1bn of other outsourcing deals this month.

So will outsourcing continue to be the sweet spot in the IT sector in 2004? Certainly we aren't looking at growth rates anywhere near those of the 1990s but analysts are predicting services growth above that of the rest of the IT market as companies, especially in the fiercely competitive financial services sector, continue to be attracted by the cost savings.