Research: 2012 State of IT Outsourcing

Sep 18, 2012


2012 State of IT Outsourcing

Outsourcing. It’s a loaded, often misrepresented or misunderstood term that encapsulates many of the political, economic and social issues of the day—including class, foreign policy, immigration, employment and national security. Critics lambaste outsourcing as a way for big corporations to replace U.S. workers with less-expensive contractors, sometimes (but not always) located in offshore locations with much lower wages. And it’s true that outsourcing IT operations can reduce costs. Of the 564 respondents to our ­InformationWeek 2012 State of IT Outsourcing Survey, 82% use external IT services, whether staffing, support, phone or data center ops, development, management or engineering. Most outsourcing customers rate cost savings as a top benefit; for 22%, it’s the primary advantage.

But the notion that IT outsourcing is merely a way for companies to slash payroll is no longer valid. Indeed, the cost advantages of shipping work to India, in particular, have eroded as salaries have risen 10% to 15% or more in just the past year, according to various estimates. Most CIOs now want more from their outsourcers than just a quick boost to the bottom line. They want partners that can help them innovate, give them more business flexibility, and deploy scarce IT resources where and when they’re needed. “When talking to other senior execs, I often use the idea that we do not own any electric generators, yet we use electricity every day,” says Robert Isherwood, CTO at ad agency 22squared. “The magic of outsourcing is giving us the ability to focus on those areas where we can be truly great, and then hiring partners who are also truly great in their areas. It’s a strategic decision, or capabilities and capacity consideration, more than cost driven.”

This level of “magic” doesn’t just materialize. If an organization doesn’t build up its ability to manage contractors, it can end up in bad shape: 29% of this year’s respondents reported firing a vendor, up five percentage points from our 2011 survey. Is it the vendors’ fault—or our inability to manage the process?
In this report, we’ll analyze our latest survey and then jump into a few case studies. (R5410912)

Survey Name  InformationWeek 2012 State of IT Outsourcing Survey

Survey Date  July 2012

Region  North America

Number of Respondents  564

Purpose  To determine the role of outsourcers, including public cloud providers, in delivering IT services to enterprises.

Methodology  InformationWeek surveyed business technology decision-makers at North American companies. The survey was conducted online, and respondents were ­recruited via an email invitation containing an embedded link to the survey. The email ­invitation was sent to qualified InformationWeek subscribers.

Research Report