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IT outsourcing still focussed on cost, says Gartner

Posted: 21 Mar 2006     Print Version  Bookmark and Share

Keywords:Gartner  data security  privacy 

Strategic IT outsourcing can be an integral part of an organisation's long-term business success, but a latest survey by Gartner Inc. shows that the majority of organisations worldwide are still focused on tactical IT outsourcing to achieve short-term, cost-focused objectives.

During the second half of 2005, Gartner conducted a global IT outsourcing survey in North America, Western Europe and Asia/Pacific in which a total respondent base of 945 individuals discussed outsourcing practices, issues and challenges. IT outsourcing consists of data centre, desktop network and enterprise applications outsourcing.

According to the survey, "controlling/reducing operating costs or improving efficiencies" was identified by more than half of the respondents in each region as the primary value they expected to receive from IT outsourcing. Efficiency deals are focused on cost control and, over time, cost reduction with the goal of maintaining consistency in service delivery. The survey found that fewer organizations focused their IT outsourcing initiatives on accelerating or improving business outcomes, called enhancement deals, or significantly improving or altering their competitiveness, referred to as transformation deals.

Overall, variations existed by vertical market and by geography. Financial services, government, process manufacturing, services, transportation and wholesale/retail organizations all ranked cost take-out as the top driver of IT outsourcing. North American respondents identified "improve IT service to end users" as their leading driver. The top two inhibitors to IT outsourcing focused on data security or privacy issues and concerns around the potentially high costs of outsourcing.

"Companies have a growing concern about losing control of their intellectual capital and the business knowledge of key employees whose jobs or roles may be threatened by outsourcing, particularly when downsizing occurs," Ms. Allie Young, research vice president for Grtner's Sourcing research group said. "As part of a sourcing strategy, organizations must carefully examine the goals they wish to reach from outsourcing, but equally their concerns. This exercise not only will help in developing a sourcing strategy, sourcing maxims and prioritization of goals, but will educate various constituents in the organisation about realistic outcomes and possible false assumptions or misperceptions that it holds about outsourcing."

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