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During
the past couple of years, the economic downturn has
forced European midsize enterprises to utilize IT
outsourcing as a way to consolidate, rationalize IT
infrastructure, reduce IT investment, and improve
the balance sheet, while focusing on core business.
As a consequence, while the growth of services such
as IT and business consulting was hindered between
2001 and 2003, IT outsourcing has experienced a favorable
growth period.
In
the past two and one-half years, IT outsourcing and
business process outsourcing (BPO) fared better than
project-related services, such as system integration
and consulting, though Gartner believes that, from
late 2004, project-related services are likely to
rebound, while IT outsourcing and BPO may experience
slower growth. At a time when many external service
providers (ESPs) are reviewing their strategies to
include services and products specifically designed
for the midmarket, it is important to remember that
this market is still largely immature in terms of
IT service adoption.
The
needs of the European market are not identical to
those of midsize businesses (MSBs) in other regions,
and a winning strategy will require careful triangulation
of MSBs' national/regional, industrial and business
context. ESPs who want to take advantage of this midmarket
opportunity should take the following recommendations
into consideration:
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ESPs
trying to expand their presence in the European
midmarket must develop a strong local presence
and a business development plan built where the
main ingredients of cost efficiency and technical
capabilities can be integrated with deep vertical
knowledge and business expertise. |
• |
To influence both IT and business senior managers,
ESPs must market business solutions – not
just IT solutions – and present their offerings
in terms of specific solutions and business advantages
instead of the direct selling of products or capabilities.
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To achieve economies of scale in the midmarket,
ESPs should evaluate the potential for mixed approaches
in which a provider works with a set of clients
who are willing to give up a high level of infrastructure
customization, or even drives the creation of
consortia by vertical industry, keeping a close
contact with the market while building the set
of required solutions. |
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Relative growth is likely to be higher in the
midmarket than in the large-enterprise market,
but the healthy niches in each country must be
discovered and carefully exploited. In doing so,
it’s better for ESPs to develop comprehensive
business solutions that are largely designed,
integrated and tested for selected vertical markets
vs. point solutions for many vertical markets.
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The
bottom line – to successfully compete in the
European midmarket for IT services, ESPs must develop,
test and market business solutions focused on selected
vertical markets, rather than IT solutions. A sound
go-to-market strategy is a must-have to compete in
a market where highly specialized niche providers
will often emerge as leaders.
Learn
more about the purchasing plans of IT decision-makers
in Europe’s top three IT markets. Meet face-to-face
at Midsize
Enterprise Summit Europe. For details on presentation
opportunities, click
here.
Reference
Research Note
Outsourcing Issues for the European SMB Market
Publication Date: October 27, 2003
Author: Gianluca Tramacere
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