European IT services market set to shrink

IDC predictions downgraded as regional GDP drops faster than expected

European GDP decline hits IT services growth

The European IT services market is expected to decline this year as the regional economy shrinks, according to research by analyst IDC.

The latest figure for GDP growth in Europe shows a decline of 4.0 per cent, down from the 2.5 per cent slump predicted in March, which has caused IDC to downgrade its annual IT services forecast from growth of 0.6 per cent to a fall of 0.6 per cent.

"Companies are rethinking their top priorities, looking at projects that will provide an immediate return on investment, deferring large new IT projects, and turning to outsourcing to lower their cost structures," said IDC European software and services research manager Laura Converso.

IDC expects a 3.0 per cent decline in project-oriented activities for 2009 due to customers continuing to delay decisions about new project work and add-ons to deployed systems. But the researcher pointed out that clients are still investing in projects helping them to address key pain points, such customer retention, supply chain optimisation, and merger and acquisition integration.

IDC's outsourcing forecast sees only a small reduction of 0.2 per cent from its original estimate of 4.2 per cent growth. But figures for IT training show a decline of 10.4 per cent, which IDC said was a result of education activities being cancelled, or being replaced by on-the-job instruction. The figures for general support and training have also been reduced, showing a decline of 4.8 per cent for 2009.

Analyst Gartner recently released figures suggesting that global IT services revenue grew 8.2 per cent from £463bn in 2007 to £501bn last year. But much of the growth came in the first six-to-eight months of the year, before the downturn hit vendors