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xSPs in Latin America Strive to Simply Survive

For technology companies, the soft markets of the last two years have been a dose of hard reality after the boon days of the late '90s. According to a recent report released by IDC, no industry has been hit harder than the Latin America IT market.

As enterprises struggle to both to survive and compete globally, many have focused on core competencies and are considering outsourcing part of their IT infrastructure.

This, of course, creates an opportunity for xSPs in Latin America. Much like their global counterparts, xSPs are caught in an industry shakeout and many won't survive, IDC predicts. In competing for business against traditional outsourcers, xSPs need to better understand how to address the issues that might prevent enterprises from adopting the xSP model. Earlier this year, for example, IDC reported that security and reliability are the two top xSP-related concerns of IT decision makers in Latin America.

IDC's Latin American IT Decision Makers Consider xSPs and Outsourcing in 2002 is based on results from a survey of nearly 1,000 IT decision makers in Latin America's six largest markets: Argentina, Brazil, Chile, Colombia, Mexico and Venezuela. The study looks at both the concerns and interests in outsourced services among these decision makers.

The IDC report suggests that xSPs should address security and reliable customer service concerns by looking at how xSPs in other regions have addressed these issues. Education is key, according to IDC. For example security concerns may stem from a fear that data is going to intermingle with a competitor's data on the same server, which some potential customers could see as compromising the protection of their data.

The good news is that conditions in Latin America will improve for xSPs in 2003, according to IDC, who cites that customers in Latin America have indicated a definite interest in exploring outsourcing via the xSP model. However, IDC cautions, it is up to xSPs to boost customer confidence in the model.

IDC estimates that worldwide xSPs market will reasch $547 billion in revenue by 2006, up from $195 billion in 2001. The definition of the xSP market remains somewhat vague, however. According to IDC, a number of service providers fit its definition: ASPs, management service providers (MSPs), network service providers (NSP), storage service providers (SSPs) and others. xSPs must meet four criteria, according to IDC:
  1. Services must be delivered over the Internet
  2. Services must be externally managed
  3. Service must be based on a one-to-many model
  4. Services must be offered on annuity-based pricing

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