Outsourcing still growing

Outsourcing in all forms is set to take a growing share of corporate IT budgets, according to the Aberdeen Group. The trend is being driven by companies looking to cut costs and the improved services offered by service providers.

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By  Neil Denslow Published  October 3, 2002

Outsourcing in all forms is set to take a growing share of corporate IT budgets, according to the Aberdeen Group. The trend is being driven by companies looking to cut costs and the improved services offered by service providers, the analyst house adds.

Aberdeen’s report covered all areas of IT outsourcing from traditional operations activities to offshore software development and maintenance services. It found that approximately 74% of respondents spent between 1% and 10% of their IT budgets on outsourcing — the average figure was 9.4%. These figures are expected to rise, as operational functions become more routine and as automated and service suppliers improve their service levels.

"The fundamental value propositions of outsourcing - reduced costs, better internal resource allocation, ability to focus on core business and activities - have been a constant in the IT services industry for decades," says Stephen Lane, research director, Aberdeen Group.

"What has changed, however, is the impact of technology on the outsourcing delivery model. Given the current economic climate, it's not surprising that business and IT decision makers are showing significant interest in all forms of outsourcing as a means of reducing costs. If a business process is not strategic or core business and can be done cheaper and with higher service levels, it is a strong candidate for outsourcing," he adds.

The most commonly outsourced business process is help desk services, which had been outsourced by 30% of companies in the survey. The main reason given for outsourcing was to enable internal staff to focus on core competencies, while the greatest concern about outsourcing was loss of control. 30% of respondents were also using or evaluating offshore outsourcing services.

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