European companies to increase their outsourcing spend

But they will demand more flexibility from providers, says report

Outsourcing rising

Outsourcing is growing strongly in Europe, with organisations set to increase their spending on external services as IT budgets remain under pressure, according to a recent survey published by analyst firm Gartner.

More than half (53 per cent) of organisations in Europe told Gartner they would outsource more in 2010, and 40 per cent are planning to increase spending on external IT services.

Service providers will pick up new customers and those that already splurge big bucks on outsourcing intend to up their spend. The study found that the number of organisations that spend from 50 per cent to more than 75 per cent of their total IT budget on external service providers is on the rise. But it won’t be a cushy ride for service providers.

“Pressure on capital and IT operating expenditure is still strong, and European organisations expect providers to deliver further cost reductions,” said Claudio Da Rold, vice president at Gartner. ”Although 40 per cent of respondents said that they will increase the external share of their budget, only 24 per cent said that they will increase the budget for providers, and almost a quarter of organisations still expect that their IT services budget will continue to decrease in 2010.”

The survey showed that organisations of all sizes and with IT budgets of various magnitude are now showing an interest in outsourcing. It found that 14.7 per cent of organisations with IT budgets of less than €1m expressed interest in outsourcing, compared with only 6.1 per cent of organisations in this category in 2009.

The online survey was conducted among 206 organisations in Europe during in the first quarter of 2010.

European organisations are still focusing on IT cost control but they are looking for outsourcers to provide more than “my mess for less”, says the report. Organisations increasingly require access to resources and capabilities, flexibility and scalability. That will stretch the ability of service providers to meet their requirements, reckons Da Rold.