Conclusion 04

Conclusion 04: Drivers

While the recession has loosened the tight IT labor market, IT execs still feel compelled to outsource because they lack staff or skills. That makes outsourcing a necessity, not a choice—hence IT execs probably feel they lack the leverage to bargain for better deals when they renew outsourcing contracts.

When asked for their top reason for outsourcing, 25% gave cost savings as their leading reason, up from 4% in 2001. But when asked for their top three reasons, a lack of internal expertise (49%), focusing on core competencies (49%) and lack of internal staff (43%) rated higher.

Larger companies are more likely to outsource to develop applications and capabilities quickly, 26% to 17%. Smaller companies, however, more often outsource so they can focus on core competencies, 54% to 47%, respectively—one of the most frequently discussed rationales for outsourcing.

Twenty-two percent of CIOs said they wouldn't use the same outsourcing company again. Reasons included a strong preference to build internal staff (62%), the function being too core or sensitive to outsource (42%) and not enough value for the money (40%).

This article was originally published on 05-15-2002
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