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Study: Flexibility, reliability still hinder outsourcing

Karen Guglielmo, Site Editor

BOSTON -- Lack of control and flexibility remains the primary inhibitor for outsourcing, according to the results of a recent Jupiter Research survey on IT infrastructure and services outsourcing.

More than 91% of the 160 IT executives interviewed in the study listed those shortcomings as their top concerns. Interestingly enough, these [lack of control and flexibility] are the same inhibitors cited by IT executives four years ago.

"Perception continues to be a problem in the outsourcing industry," David Schatsky, vice president and research director of Jupiter Research told an audience at the IT Infrastructure & Management Services Conference last week in Boston.

"Outsourcing still tends to have a bad name among IT organizations for various reasons, including the collapse of many providers and their inability to address reliability and flexibility issues," he said.

Despite the lack of confidence customers have in service providers, they're still spending money on outsourcing. According to Jupiter's findings, IT organizations are spending approximately 25% of their budgets on outsourcing IT infrastructure or management.

And 58% of IT executives reported 11% or more cost savings on outsourcing versus keeping an application or service in-house.

"Cost savings and reducing costly staff remain the top value propositions of IT outsourcing," said Schatsky. "While cost savings isn't the sole driver for outsourcing, companies have come to expect significant

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savings."

The most commonly outsourced IT services are Web hosting, systems integration/development and network management, according to the survey results. As for the specific applications that companies are having hosted or managed by a service provider, e-mail (44%), e-commerce Web sites (35%) and intranets (20%) topped the list. CRM was listed last, with only 12% of respondents outsourcing the hosting or management of this type of application.

Ultimately there's still a lot of room for growth in the IT outsourcing industry, according to Schatsky. While cost savings is a necessary benefit for IT organizations considering outsourcing options, it's not the only one. Service providers must address the reliability and flexibility concerns of IT organizations to gain industry-wide acceptance and usage.

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