Some Facts on IT OutsourcingTuesday, January 03, 2006
Key findings in IT Outsourcing are as follows:
Risks of IT Outsourcing:
Organizations are most concerned with potential loss of control – control of the project, scope creep, the technologies, the costs, and of their company’s Information Technology direction, when asking about the greatest risks of outsourcing. Survey respondents also listed the financial stability and longevity of the outsourcing provider as a concern as well as deterioration in quality of service and non-compliance to service level agreements. Respondents are concerned about the inability to retain knowledge and expertise in-house as well as being dependent on an external provider for services that, in some cases.
Offshore Software Outsourcing
Out of 100 only 29 of the companies surveyed are Offshoring, and found out that the services they outsourced offshore initially, respondents listed business process and other application development (41%), ERP application development (27%) and CRM application development (17%). Till date, companies surveyed said they rely on offshore IT outsourcing providers for business process (48%) and other Software application development (41%), ERP application development (21%) and help desk (21%).
Keys to Successful IT Outsourcing
If there are listings of the most important factor of a successful outsourcing project, the reliability of the outsourcing provider is the most frequently, survey respondents cited. Communicated objectives, expectations and performance measurements were major factors as was the importance of up-front communication and contracts that clearly spell out service level agreements. To achieve success, solid project management and partnership management skills were also important, and compatible corporate cultures and a commitment to work together will help in that area. IT professionals stressed the need for a partnership that is equitable to both parties and one that is based on trust and mutual dependence.
Perceived Risk in Offshore IT Outsourcing
By survey, 15% believed that the operations with offshore outsourcing are at risk as a result of political/social unrest in parts of the world. Thirty-eight percent believe that there is a moderate risk while 47% perceive little or no risk to their IT operations.
Information Technology Outsourcing Gained Momentum in recent Years
Out of 120 companies that outsource in majority, 51% of respondents reported that their company began outsourcing in the past three years. More than two-thirds of survey based said that their company’s outsourcing services, close to 25 % and said their outsourcing began between 1997 and 2000 while other 25% began outsourcing prior to 1996. More than three quarters (77%) of those surveyed said their organization will increase its IT outsourcing spending in 2003 from 2001 levels.
Benefits of Information Technology Outsourcing
When asked to estimate their company’s savings from Software Outsourcing as a percentage of the total IT budget, respondents reported savings of 11.2% in year 2001. The key reasons for the company outsourced IT services were a lack of internal staff (32%), to lower ongoing costs (29%) and to improve quality (20%). The other benefits the organization has experienced to date as a result of outsourcing is the improved quality (29%), lower ongoing costs (25%) and faster time to market (21%).