Study: Outsourcing's Benefits Too Much To Ignore - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

IoT
IoT
Business & Finance

Study: Outsourcing's Benefits Too Much To Ignore

AMR Research says the number of IT companies that outsource will jump from 20% to 50% in three years.

Another market researcher is weighing in with predictions that IT outsourcing is poised to grow substantially. AMR Research says the number of IT companies that outsource will jump from 20% to 50% in three years.

"The reason for the dramatic growth is quite simple," says Lance Travis, lead researcher on the study. "Cost savings from outsourcing are too compelling to ignore. The more aggressive a company's outsourcing strategy, the more money it can save. Unfortunately, risk increases along with savings."

The lure of offshore outsourcing is particularly enticing because so much money can be saved, he says. Also, the dynamics of offshore outsourcing are changing rapidly. With the help of improved VPN technology, some IT managers are finding offshore operations that failed just three years ago can often be implemented relatively painlessly.

Network advances in security, leased lines, and storage all contribute to making offshore outsourcing painless for the experienced IT manager who may have a tight budget.

Travis remembers from his days at Hewlett-Packard that networks were not so sophisticated--with the result that usually only the largest of the multinational companies could afford to use offshore outsourcing in a big way. One of the major changes is that companies with undersized budgets now can afford offshore outsourcing because the technology is cheaper and more reliable.

"Almost everyone who does a first offshore [job], has a problem," Travis says. "The second and third attempts gradually get better. The culprit is often a bad process at home."

Many IT managers have poor processes at their internal installations that manage to perform well even though the IT people may be operating in an ad hoc manner, he says. But this situation is a recipe for disaster when operations are moved offshore.

The applications that seem to be most successful in offshore outsourcing are generally the easiest computing tasks--for instance, payroll, human resources, and benefits. Conversely, more complex work--he mentioned ERP environments such as SAP and PeopleSoft--are more likely to fare better when kept in house. Obviously the strategically important IT tasks should remain in house.

As an example of a successful move of computing activity offshore, Travis points to the example of Kana Software Inc. The California-based company has moved most of its R & D functions to India. "They're getting fine quality work in India," Travis says. "But they've kept their product architecture and product management in house."

Closer to home, Travis says the recent boom in compliance initiatives--fueled largely by the recent Sarbanes-Oxley legislation requiring better accounting record keeping--is causing IT managers to consider outsourcing compliance applications. Noting that compliance issues are "non-strategic tasks," he suggests they are good candidates for outsourcing "to experts that guarantee their services."

When an IT installation takes advantage of the repertoire of outsourcing available, Travis says many IT budgets can be cut by 40%. It won't always be easy, he says, but it will be worth it in the long run.

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
2021 State of ITOps and SecOps Report
2021 State of ITOps and SecOps Report
This new report from InformationWeek explores what we've learned over the past year, critical trends around ITOps and SecOps, and where leaders are focusing their time and efforts to support a growing digital economy. Download it today!
InformationWeek Is Getting an Upgrade!

Find out more about our plans to improve the look, functionality, and performance of the InformationWeek site in the coming months.

News
Becoming a Self-Taught Cybersecurity Pro
Jessica Davis, Senior Editor, Enterprise Apps,  6/9/2021
News
Ancestry's DevOps Strategy to Control Its CI/CD Pipeline
Joao-Pierre S. Ruth, Senior Writer,  6/4/2021
Slideshows
IT Leadership: 10 Ways to Unleash Enterprise Innovation
Lisa Morgan, Freelance Writer,  6/8/2021
Register for InformationWeek Newsletters
Video
Current Issue
Planning Your Digital Transformation Roadmap
Download this report to learn about the latest technologies and best practices or ensuring a successful transition from outdated business transformation tactics.
White Papers
Slideshows
Twitter Feed
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
Sponsored Video
Flash Poll