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Is the IT outsourcing industry in trouble?

Do Government cuts and falling confidence mean the IT outsourcing sector is about to face some hard times?

By Tom Brewster, 1 Jun 2010 at 15:06

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Confidence is key

The outsourcing community may also have to deal with confidence issues.

“I would agree that confidence in terms of IT outsourcing certainly for this year has probably been shaken by some of these changes. Certainly on some of the contracts that are at risk I think some of the providers there will have their confidence shaken,” said O’Brien.

A recent Ovum survey pointing to worries over security may be cause for concern as well.

The independent analyst questioned 500 chief information officers (CIOs) from across the world, just seven per cent of whom said they were thinking about getting another firm to manage their IT security over the next two years.

However, NOA chairman Hart claimed that CIOs will inherently be wary of outsourcing.

“CIOs are bound not to be too keen on outsourcing their IT because that leaves them with no empire. A couple of years ago, one government CIO told me he was the envy of other government CIOs because he had such a large empire,” he said.

“The day of the mighty CIO is over and now the CIO’s real job, I think, is to help the IT align with business,” Hart added.

“CIOs that want to turn the clock back aren’t going to be around much longer.”

You’ve gotta have faith

There is also clear faith being placed in outsourcing in general by those already in the community.

More than half of respondents to a survey from the NOA from April said that they are reviewing their current outsourcing contracts and thinking about new sourcing opportunities because of rising confidence.

Nearly two-thirds (60 per cent) of respondents to the poll, which surveyed UK outsourcing end-users, said they are planning to outsource services this year that were not outsourced before.

The financial services sector emerged as the most positive industry when it came to outsourcing, with 71 per cent of respondents from this area saying they felt upbeat about handing over work to providers in 2010 and beyond.

Outlook

Both O’Brien and Hart foresee a positive outlook for IT outsourcing in the coming years, while recognising that this year could be a little sticky.

“Looking forward, I think there is a great deal to be optimistic about. The question is when will that shift happen. I think for the next 12 months we’re going to be in a very uncertain phase but moving beyond that IT outsourcing [and] business process outsourcing are going to be on the up again,” O’Brien added.

As with the economy at large, IT outsourcing is set for a slightly turbulent 2010. After this, however, the future is looking considerably brighter.

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2 comments

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Understand the Customer/Client?

My main objection to outsourcing, specifically abroad is simple. When a customer calls for support they are either a) frustrated, b) annoyed.

If they cannot understand the person they are talking to, or be understood by them, because of accent issues, then even the frustrated will swiftly *become* the annoyed.

All support staff need to be able to understand the customer *and* be understood by them. I've worked in phone based jobs for 14 years but sometimes even I have problems with thick accents.

By CeltiKaos on Friday Jun 4

Cost Cutting

Let me tell you how outsourcing really works.
Senior IT managers get rid of loyal inhouse staff that know what they are doing
in order to reduce the payee pot replacing them with external people that don't
have a clue what they are doing and no loyalty to your company whatsoever.
Once things start to go wrong because of all straight-to-production hacks taking
place in the background you spend a lot of time waiting for the 'needful' to be
done and awaiting the arrival of that promised root cause analysis report which
you know darn well will never ever arrive.
Then senior IT managers do the sensible thing and bring contractors in at three times
the cost to sort out the mess. That is how it really works and will work like that until
there comes some business user with more than 3 brain cells (if there is such a thing)
and looks at the overall cost of the outsourcing (the cost of wasted time dealing with
countless fatal errors + the cost of bringing contractors in).
After that, senior IT management fold their tents and off they go to 'cut costs' somewhere else.

By Ananda on Saturday Jul 3