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Issue Date: March 2008

Outsourcing enhances business performance rather than to just cut costs

6 March 2008

More organisations are now turning to IT outsourcing (ITO) to enhance business outcomes instead of just to control or reduce costs, according to a survey by Gartner.
According to a 2007 Gartner survey of 750 IT and outsourcing executives in North America, Asia/Pacific and Europe, 41% of organisations that were currently outsourcing IT said they use ITO to enhance business outcomes and performance. Approximately 47% of organisations still identified controlling or reducing costs as the primary benefit expected from ITO. However, there is a shift taking place. In 2005, only 28% of respondents reported enhanced business outcomes and performance as the primary benefit of ITO.
"Cost issues remain strong, and the shift in buyer expectations toward viewing ITO as a means to enhance operations is a sign of a maturing market that has higher expectations from ITO providers," said Allie Young, vice president and distinguished analyst at Gartner. "In addition to cost competitiveness, providers must create a vision for outsourcing that accentuates other business or IT impact to appeal to a maturing buyer set that will eventually seek more value."
In all major regions, buyers of ITO anticipate increasing their use of ITO in the coming 24 months. On a global basis, 88% of organisations that are currently outsourcing anticipate moderate or high levels of outsourcing compared with 67% in 2007. Over the next two years, 89% of North American organisations anticipate outsourcing at high or moderate levels, up from 67% in 2007.
About 85% of Europe, the Middle East and Africa (EMEA) organisations and 90% of Asia/Pacific organisations expect to continue at the same level or increase their outsourcing during the next two years, up from 62% and 73% in 2007, respectively.
"The appetite to outsource is a compelling reason for providers to concentrate on and ensure their current client base is well-served, satisfied and continues to see progress in reaching their outsourcing goals," said Dane Anderson, research director at Gartner. "Furthermore, IT outsourcers must keep a close watch on changing buyer needs in their ITO deals and vigilantly monitor how buyer's goals and objectives may be changing from ITO as a pure cost takeout measure to greater expectations for IT enhancement in contributing to the optimisation of business operations."
Both North America and Asia/Pacific respondents said data privacy/security was the top inhibitor to ITO, while EMEA organisations were more likely to be concerned about loss of control in outsourcing.
"Providers need to understand what the likely potential fears, uncertainties and doubts that their prospective and current clients have when considering or making their outsourcing decision," said Ms. Young.
"Providers must value their current client base as an important growth opportunity and the ones that can proactively address the most-common concerns will be better-positioned for future growth."

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