GARTNER DATAQUEST SAYS NORTH AMERICAN IT OUTSOURCING INDUSTRY TO EXPERIENCE CONTINUED GROWTH THROUGH 2005.

While the economic recession is slowing growth in many sectors of IT, the North American IT outsourcing market is benefiting as companies try to find ways to save expenses, according to Dataquest Inc., a unit of Gartner, Inc. (NYSE: IT and ITB).

Gartner Dataquest forecasts the North American IT outsourcing market to reach $101.6 billion in 2001, an 8 percent increase over 2000 revenue of $93.8 billion. By 2005, the North American IT outsourcing market is projected to reach $159.6 billion, for a five-year growth rate of 11.2 percent.

Outsourcing can meet clients needs in good and bad economics. The current economic decline is bringing cost reduction back to the top of enterprises' agendas, which is a benefit of outsourcing. During the economic boom, demand for business transformation and scarce IT skills had driven outsourcing. In the long term, outsourcing is increasingly capable of delivering access to new technology solutions through IT utility services. Access services minimize implementation costs and risks.

"In a poor economy, a compelling benefit of hosted solutions is the ability to deploy new technology solutions with little or no capital investment. Beyond the economic downturn, outsourcers should look for increasing opportunities with IT utility services in the small to midsize business market," said Bruce Caldwell, principal analyst for Gartner Dataquest's IT Services worldwide group. "As the business climate improves, enterprises will continue to look toward outsourcing as a means to increase business value by accessing critical skills and technologies for innovation."

Gartner Dataquest believes that IT utility services will mature sufficiently within the next two years to realize greater market acceptance among small to midsize businesses. Larger businesses have already demonstrated a strong acceptance level for IT utility services, such as hosting for IT infrastructures and applications.

"During the economic downturn, outsourcers should expect to see increased demand for financial engineering through outsourcing," said Caldwell. "Historically, financial engineering has been a key driver of outsourcing growth as economically stressed companies seek to unload IT assets and human resources and convert unpredictable costs to fixed costs."

Additional information is available in the Gartner Dataquest Report "IT Outsourcing Service Growth Continues in North American Market." This report examines the outlook for the North American IT outsourcing market from 2000 to 2005.

This information is produced by Gartner Dataquest's IT Services group. This group provides a complete picture of the IT services industry, including network integration and support, hardware services, consulting and system integration, outsourcing, life cycle service, strategic partnering and services marketing, software support, and vertical markets, including communications, education, financial services, government, healthcare, manufacturing, and retail. Reports can be purchased on the Internet at www.gartner.com.