Almost all companies will outsource IT by 2006

Almost all global companies will have outsourced some of their IT operations by 2006, according to a report from analyst firm...

Almost all global companies will have outsourced some of their IT operations by 2006, according to a report from analyst firm Meta Group.

The Outsourcing Desk Reference report, released yesterday (1 July), revealed that 70% of companies are outsourcing some of their IT operations. It said this would continue to rise to almost 100% over the next three years.

There are a number of steps IT directors need to make when considering outsourcing projects, said Dean Davison, vice-president and director of outsourcing and service provider strategies at Meta Group.

"The first step should be to articulate primary business objectives before outsourcing suppliers are invited for briefings,” he said. “Don't make supplier selection or negotiation your first step.”

"Most importantly, expectations need to be realistic and set ahead of time,” Davison added. “Incorrect expectations are the primary reason why outsourcing arrangements are perceived as failures."

The report also outlined some of the most common misconceptions about what an outsourcing arrangement can achieve. These include:

  • IT expenses will be reduced automatically;
  • Suppliers use best practices;
  • Offshore suppliers offer huge savings;
  • Suppliers are simultaneously better, faster, and cheaper than internal IT.

"While such results might occur, there are no guarantees," Davison said. "With the help of benchmarking tools, organisations need to weigh the risks associated with outsourcing against the risks of keeping the skills in-house.”

Meta has developed a methodology, called the outsourcing lifecycle, to help IT directors through the outsourcing evaluation process. The process includes the following steps:

  • Setting the right expectations throughout the organisation before entering any outsourcing engagement
  • Identifying the enterprise's short- and long-term business objectives and associated risks
  • Selecting outsourcing suppliers that can meet the business objectives throughout the lifecycle
  • Negotiating contracts with service levels that align with primary business objectives
  • Managing the outsourcing supplier relationships with a strong, dedicated team throughout the life of the contract

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