IDC Canada: Global outsourcing is on the rise

Research firm IDC Canada predicts the overall Canadian IT outsourcing market will reach close to $15 billion this year. And if Canadian service providers wish to successfully compete in this space, analysts say certain resources and tactics are required.

IDC recently participated in a Webcast, titled Outsourcing Monitor, together with the Centre for Outsourcing Research and Education (CORE), an independent, not-for-profit organization that focuses on research and education on outsourcing, global sourcing and other collaboration efforts, and Prima Management Consulting.

The Webcast was based on bi-annual research collected by IDC, CORE and Prima Management Consulting, that aims to assess the current state of the Canadian and global outsourcing market place.

Frank Hart, president of Regina, Sask.-based Prima Management Consulting, said the recent global economic recession has sparked the growth of global outsourcing demands.

“The market will continue to expand through 2010 with an increased adoption of global sourcing, but Canada will continue to lag behind the U.S. and Europe,” Hart said.

More businesses are looking towards offshore outsourcing to help them reduce costs, better manage their resources, and to be more competitive with other businesses in the market, Hart explains.

Hart said firms in India are beginning to win larger scale ITO (information and communication technology) contracts from Canadian companies because of their lower-labour costs and their ability to handle things remotely. This ability is made possible thanks to the Internet and high-speed Internet access, he added.

For those Canadian service providers who wish to play in this space, Hart said they look at Canadian global outsourcing company, CGI, as an example.

“Canadian service providers who have clients in Canada that are global will need to have resources in those countries too in order to serve them,” Hart suggested. “If you aspire to be a global service provider, you need to have a global presence and resources.”

Sebastien Ruest, vice-president of infrastructure, services, software and services group at IDC Canada, added that partners should also differentiate themselves in the market by offering specialization services.

Ruest said this year, the overall IT outsourcing market in Canada is expected to reach close to $15 billion, growing at a rate of about 3.8 per cent from 2009.

“There are no more boundaries for where delivery services will be coming from,” Ruest said. “Technologies such as cloud computing are making this possible.”

Last year, the financial and telco and utilities verticals showed strong participation rates with outsourcing services, while the retail, wholesale and manufacturing sectors showed a “relatively lower” penetration rate of IT outsourcing. This year, Ruest said more interest in IT outsourcing is now being expressed by the distribution and manufacturing industries.

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Maxine Cheung
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