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IT outsourcing keeps on growing

The majority of organisations will have adopted IT outsourcing by 2005, claims Meta Group. The analyst house adds that the IT outsourcing market is growing at an annual rate of 15-20%.

The majority of organisations will have adopted IT outsourcing by 2005, claims Meta Group. The analyst house adds that IT outsourcing is rarely discretionary and it notes a 15-20% annual growth rate in the outsourcing market.

Meta believes that by 2005, nearly all IT organisations will outsource at least one mission-critical technology operation, making successful outsourcing partnerships and decisions a core competency for IT organisations.

"Outsourcing often involves mission-critical operations, and vendor evaluations are often based on the 'comfort level' of executives with vendors' reputation and proven performance — it is very difficult for a vendor to overcome negative market perception," says Dean Davison, vice president with Meta Group's service management strategies service.

"Outsourcing can enable business to move faster, become more efficient, or sometimes reduce support costs, but vendor choice and contract structures must be carefully calculated and negotiated," he adds

When assessing which outsourcer to opt for, Meta makes some key recommendation. Firstly, it says that size is not everything. It accepts that the leading vendors are also the largest, but notes that vendors with niche offerings or targeted geographical coverage can perform at levels close to those of the leaders. It adds that performance criteria are usually more important than presence as an indicator of results, because outsourcing vendors provide mission-critical operations.

In general, Meta believes that the IT outsourcing sector out performs outsourcers in general. It says that “average” vendors in this segment are capable of meeting the needs of most IT organisations. The market leaders though, stand out in technological performance and business practices, as well as having a strong presence including boardroom relationships and strong brand awareness.

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