Rise Of Outsourcing

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The bright spot in this dismal economy is you. Despite ongoing layoffs and a difficult earnings season, one growth area in the high-tech market is outsourcing.

According to a recent Gartner study, in North America alone the IT outsourcing market is expected to have a compound annual growth rate of 11.2 percent through 2005. Gartner estimates that outsourcing revenue reached $93.8 billion in 2000. By 2005, IT outsourcing revenue is expected to increase to $160 billion.

KELLEY DAMORE can be reached at (781) 839-1272 or via e-mail at kdamore@cmp.com.

The reason for such growth? Businesses are realizing that they need to stick to their core competencies to achieve differentiation and profits.

Many basic functions of IT will become an outsourced service. We should see the XSP market live up to its promise and all solution providers beef up their own internal service offerings.

Meanwhile, cutbacks during the past year will force companies to turn to external sources to get projects done.

According to CRN Online Executive Producer Jeff O'Heir's story on page 3, the opportunities exist in both enterprises and government for Web applications and solutions integrating security and wireless.

Now, I am not saying this is going to be easy. Solution providers need to show that the expenditures will bring a return on investment. Other challenges include the consumer's distaste for listening to technology hype. Customers have spent millions of dollars on CRM, ERP and Web front ends in the new economy. Today customers are very leery of technology for technology's sake.

The good news is there is opportunity. The reality is it will take a lot of smart selling techniques.

Solution providers need to explain to their customers that IT is an enabler of business change. They need to measure how products and solutions can help a business and their bottom line. And they need vendors to explain to them how their products will enable this change

With this in place, we can weather the storm and look forward to a good second half of 2002 and a prosperous future for the solution provider community.

Where are you seeing the opportunities? I can be reached via e-mail at kdamore@cmp.com.

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