Innovation's Really Behind The Push For Outsourcing

Outsourcing continues to be a focal point of business-technology executives

Kathleen Foley, Contributor

October 18, 2003

3 Min Read

Outsourcing continues to be a focal point of business-technology executives. A full 72% of this year's InformationWeek 500 companies expect to use the same or an increased amount of consulting or IT services in 2003 compared with last year. Of those, nearly 10% say their use of outside services will increase significantly.

Four of the 22 industries examined make heavy use of outsourced IT services such as integration and application development, with 70% of manufacturers using them, 68% of health-care and medical companies, 64% of banking and financial-services firms, and 49% of IT vendors (see chart, p. 78). Internet or Web-site hosting are used by 70% of manufacturers, 64% of health-care and medical firms, 62% of banking and financial companies, and 46% of IT vendors.

Outsourcing RelianceCompanies in the 2003 InformationWeek 500 are looking to outsource other types of IT functions as well. More than two in five participants say that business-process management is part of their companies' outsourcing strategies, and 45% say they're involved in offshore application development or maintenance.

Three out of four of the most widely represented industries on our list are spending above average on offshore outsourcing services. More than half of the banking and financial-services firms (58%) and manufacturers (51%) are using offshore outsourcers; it's even more popular among IT vendors (63%). Only the health-care and medical sector falls below the overall average in use of offshore application development, with 32% saying they use such services.

If your company is increasing its use of consulting and IT services, let us know how at the address below.

Kathy Foley
Managing Editor, InformationWeek 500
[email protected]

Temp WorkTemp Work

Does your company use temporary or contract IT workers?

Slightly more than three-quarters of the most innovative technology users report their IT personnel include temporary or contract workers. Tech leaders in banking and financial services (82%), IT (77%), manufacturing (72%), and health care and medical (68%) report having temp workers on their payrolls.

Outsourcing FocusOutsourcing Focus

Which IT services does your company use?

The typical InformationWeek 500 company expects to spend $51.7 million on consulting and IT outsourcing this year, or 14.7% of its IT budget. This amount fluctuates slightly by industry. Banking and financial-services sites spend an average of 14% of their 2003 IT budget on services providers and consulting costs. It jumps to 16% among health-care and medical sites. IT companies spend a little less, at 12%, while InformationWeek 500 manufacturing sites plan to invest 13% in outsourcing this year.

Down To BusinessDown To Business

Is business-process management part of your company's outsourcing strategy?

This year's InformationWeek 500 companies increasingly turn to services providers to offload business processes--not just IT operations. Two in five companies report they're outsourcing business functions, including 43% of health-care and medical, 42% of banking and financial-services, 32% of manufacturing, and 29% of IT sites that participated in the study.

Going AbroadGoing Abroad

Does your company outsource application development or maintenance to offshore service providers?

Offshore outsourcing isn't making its first appearance among the InformationWeek 500. Back in 2001, nearly two in five companies reported using overseas services providers to develop and manage corporate applications--most of it was related to Y2K bugs or other legacy code. But this year, 45% of InformationWeek 500 sites are using offshore providers. One industry that has significantly increased its use of offshore outsourcers is health care and medical. In 2001, 13% of sites partnered with offshore application outsourcers. This year, one-third are.

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