Short term cost cutting still the key Outsourcing Driver.

Most businesses are still using IT outsourcing to achieve short-term, cost-focused objectives rather than to improve business outcomes or to improve their competitiveness, according to a new Gartner survey.

The survey found that more than half of the 945 respondents identified 'controlling/reducing operating costs or improving efficiencies' as the greatest benefit expected from IT outsourcing.  Efficiency deals are focused on cost control and, over time, cost reduction with the goal of maintaining consistency in service delivery.  The survey found that fewer organisations outsourced their IT as a way to improve their business or their competitiveness referred to as transformation deals.

'One of the great clashes in the market today is driven by the dominant use of outsourcing to cut costs, along with requirements for customised services,' said Allie Young, research vice president for Gartner's Sourcing research group 'Only by foregoing customisation and moving to standardised services can the market effectively and reliably deliver the cost efficiency goals.'

According to the survey, 'achieve cost take-out' was identified as the foremost driver of IT outsourcing, with large organisations more frequently identifying this driver than small ones.  Following cost take-out, respondents rated 'achieve speed, agility, flexibility,' and 'gain access to technical expertise and skills' equally as leading drivers.

Overall, variations existed by vertical market and by geography. Financial services, government, process manufacturing, services, transportation and wholesale/retail organisations all ranked cost take-out as the top driver of IT outsourcing. North American respondents identified 'improve IT service to end users' as their leading driver. The top two inhibitors to IT outsourcing focused on data security or privacy issues and concerns around the potentially high costs of outsourcing.

The survey found that the top two inhibitors to IT outsourcing were data security or privacy issues and concerns about the potentially high costs of outsourcing.  Respondents also admitted to concerns about holding onto their intellectual capital and the business knowledge of key employees.

Ms. Young said 'As part of a sourcing strategy, organisations must carefully examine the goals they wish to reach from outsourcing, but equally their concerns.  This exercise not only will help in developing a sourcing strategy, sourcing maxims, and prioritisation of goals, but will educate various constituents in the organisation about realistic outcomes and possible false assumptions or misperceptions that it holds about outsourcing.'

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