IT Outsource Spending on the Rise: Report
The percentage of the IT budget designated for outsourcing services is up 23 percent, on average, in 2012 over the prior year, according to Computer Economics' annual outsourcing study, IT Outsourcing Statistics 2012/2013. The report also found Web/e-commerce systems and application development were the two most widely outsourced functions, and outsourcing in that sector is a mature service with a high adoption level, likely to grow "relatively slowly," compared with other services.
Help desk and desktop support are the IT functions with the greatest potential for successfully reducing costs through outsourcing, while the functions with the greatest potential for improving service are desktop support and IT security. The study profiled outsourcing activity for 11 IT functions, including application development, application hosting, application maintenance, data center operations, database administration, desktop support, disaster recovery services, help desk services, IT security, network operations, and Web/e-commerce systems.
For each IT function, the company looks at how many organizations are outsourcing work and how much of their workload is being outsourced. "As our analysis shows, IT organizations are beginning to embrace cloud-based applications as well as expand outsourcing of data center operations. Other factors are also supporting decisions to outsource IT functions, including the ever-present desire to reduce costs," the report said.
Among organizations that outsource IT work, the percentage of their total IT budgeted for outsourcing services rose to 8.6 percent at the median, from 7 percent the prior year. As businesses stabilize following a recession, IT outsourcing is finally increasing, along with general IT spending. In 2011, spending on outsourcing had remained at about the same level as 2010. "We believe the longer-term outlook is for outsourcing to consume a larger share of the IT operational budget," the report said.
Cloud-based applications, expanded outsourcing of data center operations and the growing adoption of software as a service (SaaS) among businesses is also positively affecting IT outsourcing budgets, the report indicated, finding the number of organizations outsourcing application hosting is up nearly 37 percent year-over-year. In addition, more than half all organizations that outsource this function are planning to increase the amount of work they outsource. "We then present current plans by IT organizations for outsourcing each function, which gives us an understanding of whether outsourcing of a function is rising or falling," the report noted. "Finally, and most importantly, we measure the success IT organizations are having in lowering costs and improving service levels through outsourcing."