Outsourcing 2002: How CIOs Reach Outsourcing Deals - ' Conclusion 02 '
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Conclusion 02: IT Functions
The market for outsourcing IT functions has been unpredictable during the recession. But the projected trend for 2002 is to cut back on outsourcing the functions that have been outsourced most frequently—most notably the development and hosting of applications and Web sites, due perhaps to the availability of dot-com veterans and laid-off IT staff.
Application development outsourcing was used by 62% last year and only 54% this year, still enough for first place. As for application hosting, 2001 saw more activity than anticipated—it was projected by 29% of respondents last year but done by 39%—but only 34% of companies expect to outsource this function in the next 12 months.
Demand for web site development outsourcing services is projected to drop from 42% last year to 30% this year, while demand for Web hosting should decline from 44% to 33%.
It's not clear the extent to which CIOs' interest in application integration outsourcing is translating into actual outsourcing activity. Forty-four percent expected to use this kind of service in 2001, but only 27% actually did. In 2002, 34% say they will—the largest projected increase of any IT function. Enterprise application integration services are expected to rise to 27% in the next 12 months.
Web site hosting was employed far more by smaller than larger companies, 58% to 38%, respectively, but help desk and end-user support services were used more by larger than smaller companies, 33% to 17%, respectively, probably due to the numbers of customers and users large companies need to support, which made outsourcing an especially economical approach.
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