Nelson Hall, a technology consulting firm based in the UK, recently conducted a study which found that private organizations have resumed investing in information technology services. This somehow prevented the outsourcing market to shrink further. Investment in professional services, which grew by three percent, is identified as the key driver for the overall IT spending activity in 2014ís third quarter.
The research firm also pointed out that Q3 2014 is a milestone for the information technology outsourcing (ITO) segment mainly because this is the first time since Q4 2012 that spending is below the average level. In addition to that, corporate clients have gone back to their regular spending habits, and are seen closing higher ITO deals. The report also indicated that the number of long-term ITO contracts is increasing.
This is good news for IT outsourcing providers since ITO funding has been decreasing in the past two years. During the first to third quarter of this year, ITO deals declined by 20 percent mainly because of the 30-percent drop in bookings in North America. For the same period, the commercial sector in the region is up by 90 percent - though itís on the low total contract value (TCV) levels. A decline of 70 percent was seen for the public sector, also during the same period.
As for the outlook, Nelson Hall predicted that by the end of 2014, global IT services spending will increase by an average of two percent. For 2015, the report projected that ITO spending will be flat mainly because of the low level ITO activity during 2013 and 2014.