Firms fail to invest money saved by offshoring


Firms fail to invest money saved by offshoring

Failure to plough cost savings from outsourcing is stunting business growth, according to research by Capgemini.

Companies that do invest these savings enjoy 10% higher productivity than the pure cost-cutters, the survey of 161 European CIOs finds.

“Productivity growth in the US in 2005 was 1.8%, but actually fell in Europe. We are winning at cost cutting but losing at productivity and need to address this issue as a matter of urgency,” says Gilles Camoin, vice-president of Capgemini Consulting.

The bulk of spending - 87 cents in every IT euro - goes on low-value, back-office tasks such as support, infrastructure and applications management and testing/roll-out. That leaves just 5% for strategy and planning and 8% for conceptualisation and design.

Despite money saved on outsourcing these back-office tasks, strategy and planning will only see an extra 1.2% of budget over the next two years.

The offshoring tide shows no sign of abating. By 2008 47% of European firms will outsource or offshore their IT, says Capgemini

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