Large organizations are spending a median 7.4% of their IT budget on outsourcing, compared with 6.1% for small organizations and 4.6% for midsize organizations. Application hosting was the fastest-growing type of outsourcing, thanks to the growing adoption of software as a service (SaaS).
In the IT sector, the greatest potential for successfully reducing costs are through help desk and desktop support outsourcing. Disaster recovery and Web and e-commerce operations led the list for functions with the greatest potential for improving service through outsourcing.
Larger organizations do the most outsourcing as they are driven by greater budgets and needs, but nothing is keeping smaller organizations from doing the same. In fact, companies of all customer sizes may embrace the outsourcing of cloud services for applications and infrastructure.
60% of small and midsize organizations and 62% of large organizations outsource at least a portion of their application development work, while 78% of organizations report the same or better service with outsourcing application development.
Organizations can save money by outsourcing their help desk, but this move may not be worthwhile when it leads to user dissatisfaction. As more organizations turn to IT service management, the help desk becomes the main way the IT organization connects with users.
The market sector can influence an organization’s outsourcing habits. Just consider that 71% of financial services companies outsource some application development, while 67% of retail and wholesale distribution companies outsource theirs.
Organizations outsource to varying degrees. This outsourcing includes
high-tech organizations, at 65%; public/nonprofit organizations, at 64%; manufacturers, at 63%; and professional and technical services, at 47%.
Compared with performing the same work in-house, outsourcing application development costs more for 53% of respondents, about the same for 24% and less for 23% of outsourcing customers.
Organizations often outsource application development for reasons other than cost and service experience. This function ranks last in the Computer Economics’ survey and suggests a great deal of dissatisfaction exists with service providers.
Companies in the middle of the pack are reporting the strongest growth in IT operating budgets, at about 3.6%, perhaps as they try to catch up with their larger counterparts, while smaller organizations still lag somewhat behind.