Despite the Crisis, Enterprises Aren't Slashing IT Services Spend
Top Line: Although enterprises aren't raising levels of IT services investment in 2012, they're still doing an interesting mix of things with new technology
IDC estimates that enterprise and public-sector demand for IT services (such as systems integration, application management and datacenter outsourcing) in Western European grew 1.3% in 2011 and it is expected to remain flat in 2012. Demand for generic, cross-industry business process outsourcing services (such as payroll processing and customer-care services) grew by 3.6% in 2011, but is forecasted to grow just by 0.8% in 2012.
The eurozone sovereign debt crisis hit business confidence during the second half of 2011, creating uncertainty and prompting enterprises and public bodies to scale back their plans for IT spending. IDC expects this uncertainty and cautious approach to new ICT spend to continue throughout 2012.
Bottom Line for ICT Buyers:
1. IT investment in the remainder of 2012 will be mainly driven by cost control and cost cutting objectives, using IT to cut corporate running costs or simply to cut the running costs of IT itself. This may not sound very exciting, but for the sake of the organization pragmatic CIOs should resign themselves to their need to focus on this "cost agenda". When looking for the most cost-effective IT services, seek out vendors that have gone the furthest down the road of industrialization and automation of their IT and business process outsourcing services, and that have the best mix of onshore, "nearshore" (cheaper but proximate territories) and offshore based delivery centers.
2. If cost cutting is the dominant driver for IT investment, it is not (and it should not be) the only driver. Using IT investment to support for key business initiatives and strategies - including expansion into new markets - is also a critical task for many CIOs. IT can help Western European organizations to make their businesses more agile and flexible, helping them to adapt to the new economic landscape and remain competitive. IT infrastructure modernization and adoption of new IT delivery models such as server and desktop virtualization and cloud computing, for example, can help enterprises and governments to drive organizational agility, allowing them to expand, contract, merge or demerge more quickly and effectively.
3. Beyond cost control and driving greater organizational agility lies the arguably more interesting realm of using IT investment to drive the corporate top line - what we call the "growth agenda". While this agenda is by no means dominant among most CIOs in 2012, it's still there alongside the cost agenda and the need to drive agility. Growth-focused technologies include "Big Data" and business intelligence / analytics (for identifying, segmenting and tracking potential and existing customer groups) and increasingly mature social media tools (for marketing and demand creation). The smartest CIOs will often be employing a sophisticated mix of all these investment types and technologies.
For more information, please refer to Western European 2011 IT and BPO Services Market and 2012–2016 Forecast, IDC #Q05U, May 2012
