Cost cutting is still the main reason to outsource IT

There is a constant debate about the value of IT outsourcing beyond cost cutting.
Suppliers are always talking about the additional value of outsourcing. They usually talk about the innovation they can offer.

Most benefits are cost related. They might not actually be cases of low cost labour but just for example the ability to reduce the retained team and scale up when required through the service provider.

There are also benefits related to domain expertise. Service providers often have deep expertise in applying particular technologies in certain industries.

The latest research from law firm Norton Rose found that a massive 87% of user businesses and 86% of suppliers believe that cost cutting is still the main driver for outsourcing.

The research, which you can read here, has some interesting findings.
On innovation in outsourcing I had a chat with Ilan Oshri, associate fellow at Warwick Business School and associate professor at the Rotterdam School of Management.

He said innovation can be split into two in outsourcing. The first, he said, is incremental innovation, which is already built into a contract with things like improvements to processes and platforms.

In contrast, radical innovation is where the real challenge is, said Oshri.

If you want to see how to better manage innovation in outsourcing read the report by Ilan Oshri, which I link to below.

Innovation report_Cognizant-WBS_2011.pdf

Why did you outsource your IT?

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