This IDC study analyzes the trends in the Japan IT outsourcing market (ITO) by segment. It provides an overview of the market situation in 2005 as well as a forecast for 2006-2010. This study also includes IDC's recommendations to service vendors.

The Japan ITO market size increased 7.0% from the previous year to 1.7863 trillion yen in 2005. In 2006 and beyond, the Japan ITO market will witness a slowdown in services aimed solely at "IT cost reduction." The year-on-year growth rate will also decrease gradually. Presently, the service value sought by ITO users are "IS operation cost reduction" and "rapid improvement of core businesses." The ITO market was driven by needs for cost reduction during the economic slump but the importance of rapid system expansion will rise in the face of market environment changes.

"It is important for service vendors to examine the service value provided to user companies from various angles and develop ITO services that appeal to users from the perspective of the impact on not only the IS but also the various operations/businesses of the user companies," comments Satoshi Matsumoto, senior analyst, IT Service, IDC Japan.