Demand for IT services is not expected to show a major rebound in the next 12 months due to the slow recovery projected for European economies, according to a recent study by IDC.
The firm anticipates a growth of 2.2% for the year 2011, even though it is expected to remain flat in 2010. Western European IT services market is expected to see a compound annual growth rate of 3.4% between 2010 and 2014.
IDC said that the economic environment in Europe is slowly recovering, with most companies cautiously optimistic about the year ahead. Companies are slowly starting to increase spend again, but strong price pressure will limit the market’s recovery capacity in the short term.
According to IDC, enterprise acceptance of off-shoring will continue to drive project prices down, while virtualisation will put pressure on the value of the contract and partly offset market growth throughout the forecast period. It expects most companies to return to an ‘expansive’ mode and to expect IT to help them grow the business, in 2011 and beyond.
The firm predicts that many firms will be looking at how to better align their IT and corporate strategies to prepare action plans in expanding their business.
Demand for IT services in the Nordics, Germany, and the UK is expected to outperform the European average throughout 2010. The UK and the Nordics have a greater tendency to outsource that leads to a faster recovery than in most southern European countries.
Growth in France is expected to be in line with the European average, except in Benelux, Italy and Spain that will continue to suffer in the next 12 months, performing below the market average, according to the report.
Laura Converso, research manager of IDC European Software and Services, said: ”Demand for projects and outsourcing will pick up towards the second half of 2010, though new technologies and strong price pressure will limit the market’s capacity to recover. Cost-driven initiatives will remain a high priority in the short term.”
