Morgan Stanley Model: Is The Age of IT Outsourcing Over (For Now)?

From Zero Hedge:

With the dominance of IT spend (whether consulting or outsourcing) in many of today's investment theses, Morgan Stanley's new forward-looking models should have more than a few long-only money managers rocking quietly in the corner of the office (especially given IBM's dominance of the Dow). Their proprietary models (discussed below) predict decelerating revenues in both consulting and outsourcing through Q2 2013 reflecting the weak discretionary spend environment. The inflection in outsourcing is particularly notable and is far from priced in with the velocity of the fall suggesting 2009-like cutbacks. After the last recession's drop, IT outsourcing was a key area of cost reduction that also provided additional revenues for a new sector; one has to wonder if the recovery this time would be so acute (since sooner rather than later the cutting of fat leads to lascerations in the muscle).

In light of the continued deceleration predicted by our leading indicator models, we lower our top-line growth expectations across the global IT Services industry.

http://www.zerohedge.com/news/2012-11-04/age-it-outsourcing-over-now