According to a study by EquaTerra, businesses are now increasing their spending on outsourcing again, and the focus is on replacing outdated infrastructures that end up costing an organisation in the long run. Lee Ayling, MD at EquaTerra, said:
“We are seeing more infrastructure projects: datacentre, desktop services, network services. They are being looked at now because the underlying asset is at the end of its life.”
The advantages of outsourcing, which are driving this increase, are clear. Better, newer systems are always more efficient, and efficiency means greater profits. Financial service providers were first off the mark in realising this, as these companies are currently creating the most demand for outsourcing, but government departments, energy and utilities and oil and gas companies are following suit.
The disadvantages of outsourcing, which led many companies to put new implementations on the back burner for the past two years, are the cost, and the risk. Properly managed, however, these disadvantages can be mitigated, as many companies are coming to realise.
Ayling said: “We are seeing some very large programmes in SAP and Oracle; programmes that were put off during the downturn. They are often quite expensive and risky programmes with discretionary spend.”
This aside, companies need to get out of the mindset that outsourcing is cheap and in-house IT is expensive. In today’s market, the situation is not so black and white. One of the pros of outsourcing is that the customer controls the level of investment in outside service delivery; it is not necessary to hand all services over to a service provider, any more than it is necessary to lumber in-house IT with all of the work.
Steve Lewis, head of IT governance at insurance firm Liverpool Victoria, illustrated this point at the CA World Event in Las Vegas this week. Lewis explained that the traditional pros and cons of outsourcing and in-house IT are not as clear cut as we all imagine.
In 2007, Lewis began revamping the company’s approach to IT, which was more or less all outsourced. He increased the IT staff at the company from two to 300, and ended many outsourcing contracts. Lewis did this in the name of efficiency: he cut out the services that had high support costs, which were in fact more expensive to pay an outside company to deliver than the salaries of in-house IT staff. He also took back control over the technology where the company needed it.
LV now uses a hybrid of in-house and outsourced IT, taking together the pros of both types of service provision and cutting out the cons where appropriate. This kind of thinking is what drives a company’s efficiency, and should inform an organisation’s choice of IT service provider to choose a flexible company offering modular services.
Source: Business Computing World