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49% increase in spending on outsourcing in 2003.

Outsourcing attracted a lot of negative publicity in 2003, as clients including the UK Inland Revenue and the US Internal Revenue Service ran into problems with their incumbent suppliers. However, this has not deterred organizations from committing to bigger and longer deals. The UK Inland Revenue is a prime example. After ending a heavily criticized deal with EDS, the Government department signed a new $5.1bn deal with Cap Gemini Ernst & Young in December 2003, in what ranked as the year's largest single contract.

Datamonitor tracked $119bn of major IT services contracts in total during 2003, which represented a 44% increase over 2002. The biggest spending sector was the central government sector where Datamonitor tracked $18.5bn of contracts, which was more than double the level in the previous year. The defense sector was the second biggest investor, with $18.2bn in deals during 2003.

Global contracts with an offshore delivery element in 2003 totalled $1.66bn One clear trend is the massive increase in the use of the offshore delivery model, where clients source application development and management skills from low-cost countries such as India and China. Datamonitor tracked $1.66bn of contracts with an offshore delivery element in 2003, which represented a huge 890% increase over 2002. Companies such as HSBC and BT Group have come under recent fire for their plans to replace some IT and back office processing positions in the UK with offshore labour. However, Datamonitor found that only a very small amount of deals in 2003 involved offshore delivery-just 1.4%.

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Title Annotation:IT News
Publication:Database and Network Journal
Date:Feb 1, 2004
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