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October 4, 1999

Outsourcing Is Major Growth Market Says New Report

By CBR Staff Writer

The US outsourcing market, growing at a projected rate of 22% annually, will reach $110bn by 2003 according to a new study by market research company Input Inc. Almost a quarter of that figure – 24% – represents what Input calls Business Process Outsourcing (BPO), which it says is growing at the faster rate of 29% annually. Growing more than twice as fast again is the internet and intranet management segment, which Input forecasts will grow 79% annually between 1998 and 2003, reflecting the huge spending on e-business and e-commerce.

The report, called IT Outsourcing Market Forecast, US 1998-2003, identifies banking, discrete manufacturing and insurance as the largest industry markets for US outsourcing, but the telecom and utilities sectors will grow the fastest, at rates of 33% and 29% respectively. Budgets that have until recently been directed at Y2K remediation are now being redeployed, says Input. Renewed interest in thin-client configurations based on various Internet appliances and the demands of e-commerce is slowing the long-term trend toward distributed IT infrastructures. And despite recent multi-billion dollar federal outsourcing contracts announced recently, the federal sector is expected to show only a modest 7% annual growth based on projected fiscal spending.

The impending large-scale adoption of internet-enabled, wireless devices will boost demand for networking upgrades, new ERP customization, and expanded desktop services outsourcing, says Input. The increased speed of technology change bought about by the internet has made customers wary of undertaking in-house migrations to upgraded architectures and applications. Business Process Outsourcing extends outsourcing beyond the IT department, and revenue is expected to grow from $7.4bn in 1998 to $26.5bn in 2003. Input has offices in Washington DC and Mountain View, California.

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