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© Newswise.
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Information Technology Is Leading Increase in Outsourcing
For further information: For Immediate Release INFORMATION TECHNOLOGY IS LEADING INCREASE IN OUTSOURCING Information technology is leading the increase in the U.S. outsourcing market, which has more than tripled since 1996, according to a report released today by The Conference Board. The market for outsourcing was $100 billion in 1996 and $345 billion in 2000. The size of the European market is estimated to grow from $40.2 billion in 1998 to $51 billion in 2003, according to the Outsourcing Institute and Dun & Bradstreet. The report is based on a recent survey in which 93% of IT and business executives from 150 American and European companies reported outsourcing some IT and business process functions. "Outsourcing is no longer a remedy, it is a strategy," says Howard M. Lackow, author of the report. "The most important criteria for choosing a service provider are a proven track record and guaranteed service levels." Ninety-three percent of those surveyed outsourced some IT and business process functions. The functions most likely to be outsourced are Internet services, voice network management, and user support. Outsourcing is viewed as wholly satisfactory by 55% of survey participants and as partially successful by 39%. Key reasons given for outsourcing are cost savings, improved service, ability to focus on core business, and access to outside expertise. Ninety-seven percent of the survey participants say that they would outsource again, if given the chance. But the second time around they would be sure to: The survey reveals a number of changes in IT outsourcing from 1995 -- the last time The Conference Board measured outsourcing -- to 2000. The outsourcing of user support, voice network management, data network management, and data center operations have all increased dramatically. Conversely, the outsourcing of IT strategy and planning, software development and maintenance, and disaster recovery has decreased. IT HEADS MOSTLY SATISFIED WITH OUTSOURCING Overall, survey participants were satisfied with their outsourcing experiences. Not a single respondent reported dissatisfaction with IT strategy and planning, software maintenance, or disaster recovery. More than half reported satisfaction with disaster recovery, as well as with voice network management services. User support, on the other hand, garnered the most dissatisfaction, due to difficulty adapting specific technical functions required by call centers. The overwhelming majority of survey participants (94%) said their company's outsourcing objectives, across all outsourced functions, had been either fully or partially achieved. More often than not, 63% of the time the company's IT organization initiates the outsourcing effort. The most common reason is to improve function effectiveness. When initiated outside of the IT organization, primarily by senior management, outsourcing is most often undertaken as a result of business conditions, although there are a host of other drivers, including cost savings and the need to focus on core competencies. COST SAVINGS IS THE PRIMARY BENEFIT The most frequently cited benefit derived from outsourcing is reduced costs (39% of the survey respondents). This is followed closely by increased access to expertise (38%) and improved internal service (37%). The most frequently mentioned problem with outsourcing contracts is the lack of a performance/service guarantee and level. Other problems include different interests between outsourcer and company, high staff turnover, unclear contracts, increased costs, lack of flexibility as company business needs change, lack of contract governance by company, and long length of contract. A proven track record (50% of respondents) is the primary characteristic sought in an outsourcing service provider. Guaranteed service levels was mentioned by 48% of the survey participants. Although a relatively high percentage of respondents indicated that they were unsure about their post-outsourcing plans, they did not indicate that they would bring the outsourced function (s) back in-house. The lack of certainty is between re-bidding or continuing with the same vendor. Overall, the outsourcing experience is a positive one, confirmed by the fact that once a function is outsourced, it is unlikely to be brought back in-house. -30- SOURCE: IT Outsourcing Trends Report #1289-01-RR The Conference Board Information on ordering this publication can be obtained by calling The Conference Board's Customer Service Department at 212-339-0345. Media, please call Frank Tortorici at 212-339-0231 or email f.tortorici@conference-board.org.
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