Contract Watch: Eye on Europe

A mounting pile of anecdotal evidence suggests that the IT recovery is spreading from the U.S. to foreign shores.

For the first time in 27 months, server sales in Western Europe are on the upswing. Year-over-year server revenue was $2.9 billion in 3Q 2003, up a respectable 5.5 percent, according to International Data Corp. (IDC) of Framingham, Mass. In a research report, IDC said European industry sectors such as telecommunications and finance are beginning to rebound.

Similarly, Western European governments increased their year-over-year IT spending by 3.6 percent to $67.8 billion this year, according to estimates from Gartner Inc., the Stamford, Conn.-based research firm. That figure should rise to $74.5 billion in 2005 as e-government deadlines force IT managers into action.

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Voice-over-IP (VoIP) networks also are taking root in Europe. Roughly 12 percent of European companies currently integrate voice and data traffic onto IP networks, and an additional 33 percent plan to deploy VoIP by 2005, according to IDC.

So, who's cashing in on the European rebound? Hewlett-Packard Co. comes to mind. Bank of Ireland last week signed a seven-year, $600 million contract for HP's global IT services, the largest outsourcing deal ever in Ireland. HP Services will manage the bank's desktop systems, servers, mainframes, networks and printing operations.

There's plenty of room for solutions providers in Europe, too. Just ask SBI Group Inc. , which specializes in digital technology and marketing consulting. The privately held Salt Lake City, Utah-based firm recently established a strategic relationship with Framfab, a Sweden-based IT consulting firm with 430 employees.

According to Ty Mattingly, executive VP of corporate development, SBI Group generates roughly 20 percent of its revenue abroad. He expects international revenue to increase in 2004 as the IT recovery strengthens in Europe.

Mattingly is a familiar face in the channel. During the early 1990s, he served as Novell Inc. founder Ray Noorda's right-hand man. At the time, Novell NetWare commanded 65 percent of the worldwide network operating system market.

Deal 2 -- Consultant Consolidation: As I mentioned last week, Computer Sciences Corp. is combing Europe for potential acquisitions and is on track to buy two solutions providers by March (the original scoop came from La Tribune, a European newspaper). So who's in a buying mood this week? My grapevine points to Cap Gemini Ernst & Young, which may swallow at least two European IT consulting firms over the next three months or so. Stay tuned. More details to follow.

Deal 3 -- The eBay Way: Closer to home, Accenture Ltd.'s "Connection to eBay" service is proving quite popular with Fujitsu Ltd., Hewlett-Packard Co., Texas Instruments Inc. and other technology firms seeking to sell excess inventory on eBay. Since joining the service in March 2003, sales of Fujitsu's refurbished scanners have increased seven-fold, according to Fujitsu.

Deal 4 -- Offshore Backlash: The state of Indiana has canceled a $15.2 million outsourcing deal with Tata Consultancy Services , India's largest custom software exporter. Indiana politicians are proposing that all state-related IT projects be completed by U.S. citizens rather than offshore developers. You'll find the complete blow-by-blow details on Reuters.

About Contract Watch: Each week, this column examines customer engagements that are stirring the channel, and the solutions providers behind them. Our goal is to strip away the hype and tell you what's really selling—and what isn't—in today's IT marketplace. Send your tips to my e-mail address below.

Joseph C. Panettieri (joe_pan5@yahoo.com) has covered Silicon Valley since 1992. He is editorial director of the New York Institute of Technology and founder of JCP Media Inc.