Improving services to the business, rather than making
cost savings, is ITdirectors' primary reason for outsourcing IT,
according to the annual Harvey Nash CIO Market Survey
2005/6.
Forty four per cent of IT directors questioned said improved
service delivery was the main reason for outsourcing, compared to
22% who cited cost reduction as their primary reason.
The survey was based on in-depth interviews with more than 400
chief information officers and IT directors with combined IT
budgets of 15bn.
On average CIOs have an IT budget of less than 3% of their
company's turnover. But one in ten have IT budgets exceeding 10% of
turnover.
The research revealed that IT chiefs are divided over the value of
outsourcing their IT functions.
It found that the proportion of CIOs outsourcing the whole of their
IT budget fell by 5% in 2005, compared to 2004, but those
outsourcing between 60% and 99% was up 11%.
Most CIOs remain reluctant to adopt wholesale outsourcing of IT.
Only 18% outsource 50% or more of their budget, with 70%
outsourcing 30% or less. Overall, 80% of CIOs outsource, spending
on average 27% of their budget - an increase from 25% last
year.
"Those that have found good outsourcing partners are not committing
a higher proportion of their budget to the resource, whereas those
who have had a disappointing experience are withdrawing from the
outsourcing arena. Whether this is a temporary retreat or a more
permanent move is yet to be seen," the report said.
The quality of service delivered by outsourcing suppliers is
improving, according to the CIOs questioned. Fourteen per cent
reported that they had achieved their outsourcing objectives, up
from 10% last year. But suppliers still have a long way to
go.
The biggest concern for CIOs was that outsourcing did not achieve
anticipated cost savings.
The other problems highlighted by CIOs were slow response times
from outsourcing partners, their lack of understanding of the
business, poor communications and the negative impact of
outsourcing on staff morale and customers.
More than 75% of CIOs said outsourcing work offshore had met or
exceeded expectations.
When asked what they would do differently in future, many CIOs said
that in retrospect they would have spent more time ensuring that
the service level agreement with their suppliers was foolproof.
India still leading offshore choice
India remains the favourite country for offshore outsourcing.
However Hungary and the Czech Republic are playing increasingly
important roles following the extension of EU membership. China,
Malaysia, and Vietnam have also moved into the top 10. Increasingly
CIOs are outsourcing to more than one country to mitigate risk.
CW is top read
Harvey Nash asked IT directors to name the three publications
they found most useful. Computer Weekly headed the list, followed
by the Financial Times and MIS.