IDC Identifies 2007 Global Leaders in Discrete and Embedded Application Outsourcing Services

FRAMINGHAM, MA – OCTOBER 7, 2008 – In this groundbreaking study, IDC estimates that as of year-end 2007 nearly $27 billion was earned in application management (AM) revenue among the top 10 global application outsourcing (AO) providers, with 64% tied to discrete engagements and 36% integrated within larger IS outsourcing (ISO) contracts.

"Discrete and bundled AM service revenue reached an estimated $35 billion in 2007 for the top 25 global service providers," said Rona Shuchat, director of Application Outsourcing Services at IDC. "This reflects growing adoption of enterprise use of third-party providers, not only for standalone AM service but also for transformational value-added services linked into AM or broader bundled outsourcing solutions."

The traditional application outsourcing (AO) model continues to evolve, with client contracts often mirroring their experiences and expertise as first-, second-, or third-generation users. Supplier data in this study indicates that as companies gain more awareness into how to increase outsourcing benefits, they may push for either a bundled or unbundled strategy that best meets their business objectives.

This study discusses the following findings:

* Revenue estimates indicate that most traditional players have grown sizeable AM practices embedded within ISO infrastructure deals (e.g., IBM, EDS, CSC, Siemens).

* Indian pure-players started with a discrete AM focus, which is now shifting as most outsourcers strengthen their services to address the full technology stack.

* According to IDC estimates, IBM held a significant combined application management services lead at nearly $7.3 billion, reflecting its historical growth and flexibility in evolving an AM practice that supports discrete and embedded AM solutions.

* Supplier research indicates that client experience is one of the key indicators that help determine how subsequent contract renegotiation may proceed.

* As the scope and value of AO continues to increase for the enterprise customer, the maturity, flexibility, and depth of service portfolios will need to keep pace. Service providers will need to focus on optimizing their traditional outsourcing models, using advanced technologies to support increased scalability, adaptability, and lower costs.

This IDC study, Zooming Out to Capture the Broader Application Outsourcing Opportunity: 2007 Integrated and Discrete Views (IDC #214063) establishes the first baseline for assessing how the top 10 global AO service providers are performing as they expand their annuity-based revenue streams through a mix of embedded and discrete application management strategies. Enterprise adoption of application outsourcing services is reaching critical mass as the intrinsic values of these services are recognized around the world.

About IDC

IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 1,000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. For more than 44 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com.

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