European IT Services Market to Grow 2.2% in 2011 After Fragile Recovery in 2010

Posted: May 19, 2010 in Market Research

According to a recent IDC study, demand for IT services will not show a
major rebound in the next 12 months as a result of the slow recovery
projected for European economies.

Though demand is likely to remain flat in 2010, 2.2% growth is
anticipated for 2011. Overall, the Western European IT services market
is expected to grow at a compound annual growth rate of 3.4% between
2010 and 2014.

The economic environment in Europe is slowly recovering, and business
sentiment continues to improve, with most companies cautiously
optimistic about the year ahead. With the easing of economic
conditions, companies are slowly starting to increase spend again. IT
budgets have stabilized, and in some cases show some growth, but strong
price pressure will limit the market’s recovery capacity in the short
term. Enterprise acceptance of offshoring will continue to drive
project prices down, while virtualization will put pressure on the
value of the contract and partly offset market growth throughout the
forecast period.

In 2011 and beyond, we expect most companies to return to an
“expansive” mode and to expect IT to help them grow the business. With
better economic and credit conditions, a number of organizations will
be looking at how to better align their IT and corporate strategies as
they prepare action plans to expand the business. The growth focus will
again become predominant, though companies will remain cost-conscious
and take measures to gain more value for the money spent on IT.

”Demand for projects and outsourcing will pick up towards the
second half of 2010, though new technologies and strong price pressure
will limit the market’s capacity to recover. Cost-driven initiatives
will remain a high priority in the short term. We expect the ‘growth
agenda’ to return slowly, bringing investments in business intelligence
and industry-specific solutions, as well as the global
rollout/integration of applications, when these solutions can support
business growth, towards the end of the year,” said Laura Converso,
research manager, IDC European Software and Services.

Overall, demand for IT services in the Nordics, Germany, and the U.K.
will outperform the European average throughout 2010, as these markets
recover faster. The U.K. and the Nordics have a higher propensity to
outsource and are less exposed to time and materials (T&M)
activities, leading to a faster recovery than in most southern European
countries. Growth in France is expected to be in line with the European
average, whereas Benelux, Italy, and Spain will continue to suffer in
the next 12 months, performing below the market average.

Source: The Financial


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