UK organisations continue to invest in IT outsourcing

	About the research The survey was carried out by PMP Research during May 2004, and involved 100 respondents. Individuals questioned for the research were IT executives at companies with more than 500 employees and an annual turnover in excess of £50million. The research was sponsored by Computacenter.

Outsourcing spend in the UK could be set to increase despite the unpopularity of the much-hyped offshore model, according to new research.

The survey of IT decision-makers revealed that both business process and offshore outsourcing are being given the cold shoulder in favour of IT managed services.

The research found that 60% of IT decision-makers have either rejected offshore outsourcing or not considered using it within their organisation. Managed services, however, came out as the top current outsourcing trend with 60% of private and public organisations using this approach as part of their IT strategy.

This growing adoption of IT managed services may have contributed to the survey’s findings that more than 70% of organisations think spending on outsourcing will increase or stay at the current level.

Simon Walsh, Director of Client Services at Computacenter, which sponsored the research, commented: “This survey demonstrates the continuing importance of IT outsourcing to organisations trying to reduce costs and improve efficiency. Although offshore outsourcing does enable businesses to make short-term financial gains, it is not suited to delivering the service and performance improvements that companies are now looking for.”

According to the survey, which was conducted by PMP Research, improving service levels and reducing operational costs are the main drivers behind the decision to outsource. The desire to deliver consistent IT services was one of the reasons that consulting giant Mercer Human Resource Consulting opted to selectively outsource a number of its service functions to Computacenter.

Nigel Cowton, Head of UK Workforce Services for Mercer, commented: “We were facing a number of challenges, such as poor service reporting, inconsistent performance and lack of clarity around deliverables. The managed services framework allowed us to make a number of step-changes, such as implementing ITIL, that have helped to improve service delivery.”

Improved service levels were highlighted by the survey respondents as one of the three key benefits they have gained as a result of outsourcing. More than 50% stated that they had achieved measurable cost savings and gained access to a wide range of IT skills.

“Achieving financial savings through outsourcing requires a strong partnership approach. If an organisation views outsourcing just as a way to get rid of its IT problems then the relationship will not be successful,” added Walsh.

The survey also highlighted some of the other difficulties that can surround outsourcing, with 70% of organisations citing managing supplier relationships as the biggest challenge. Robert Morgan, from Morgan Chambers, commented: “Cultural compatibility between the end user organisation and the outsourcer are essential for a successful relationship. Having realistic expectations and ensuring ongoing executive sponsorship are also key.”