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Ovum: use outsourcing savings to fund new IT

Eric Doyle
As IT spending growth slows, IT managers should use cost savings from outsourcing to fund new IT projects, according to a report from analyst firm Ovum Holway.

The annual Ovum Holway report concluded that outsourcing will become more popular as a means of increasing value from existing IT assets. "It is all about making installed systems and applications work better and last longer," it said.

Anthony Miller, research manager at Ovum Holway and author of the report, said, "IT directors will have a hard time getting extra money from the board and will have to live within their existing budgets. The only way forward is to turn to outsourcing to save money that can then be used to fund developments."

Miller warned that the downside of outsourcing is the loss of control. "It may involve IT handing over a great deal of influence because the outsourcing firm will have a huge say in future choices of hardware and software," he said.

"The IT director will have to ensure that any money saved from outsourcing goes into development and does not get siphoned off into dividends for investors, as well as trying to influence the direction of development."

Miller sees this as a new age in the development of IT. The shape of the market in the 1960s and 1970s was controlled by the system suppliers, in the 1980s and 1990s the application developers ruled, but in the current decade the outsourcing suppliers will call the tune, he said.

According to Ovum Holway's figures, the UK outsourcing market grew by 19% last year - a higher growth rate than predicted.

However, suppliers will not have it all their own way. The report said those planning on offering utility-style services through the "computing-on-demand" model had better think again because systems are too complex to enable them to be "ordered by the pound or the yard".

Ovum Holway said the commodity nature of computing-on-demand fails to meet the bespoke nature of business requirements, and it cannot see how a decent profit can be made from such an offering.

An analysis of the Ovum Holway report will appear in Computer Weekly next week

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