by Beth Bacheldor

More Companies Will Outsource in 2010, And For Far More Strategic Reasons

Mar 18, 2010
Enterprise Applications

A new study by Horses for Sources offers insight into the IT and business process outsourcing market.

Long-time outsourcing blogging outfit and market analysis firm newcomer Horses for Sources just unveiled its first research report. It’s chock full of interesting tidbits I thought you all might be interested in.

First off, Horses for Sources says 2010 is going to be a strong year for outsourcing adoption. That’s its finding after talking with 1,055 senior execs responsible for buying, selling, or advising outsourcing services. The report is “The IT Outsourcing and Business Process Outsourcing Industry Landscape in 2010,” and is authored by Phil Fersht, founder and CEO of Horses for Sources.

So where is all this strength coming from? The key areas include software apps, call center, engineering management, finance and accounting, analytics, and human resources. Mid-size companies will generate the most activity, according to the report.

What I thought particularly interesting is the insight into the question, “How important are the following business drivers behind your company’s IT-BPO decision-making this year?”

A little more than a month ago I got into an aprčs-ski, late-night discussion with some dear friends over this very issue. I said the number one reason companies outsource (and in particular, offshore) their IT services is to save money. One of my friends did not necessarily agree. Turns out, I was right (something I’ll have to take up with my friend another time). But, what is really enlightening in Horses for Sources’ report is the increasing importance of using outsourcing to transform and/or re-engineer business processes, create more effective operations at a global level, and force change into business operations.

For example, more than 70% of small organizations (less than $750 million), about half of mid-size organizations (between $750 million and $3 billion), and nearly 60% of large organizations (more than $3 billion) said creating more effective operations at a global level was very important business driver behind their outsourcing decisions.

That’s great news, if you ask me. I’m of the ilk that if the main reason to do something is only to save money—and I’m not trying to downplay the importance of being a penny-wise business in this brutal economy—than you’re not really being a strategic game player. Cutting costs is all well and good, but that won’t put you ahead of your competitors, nor will it make you a stand-out. But, becoming more effective operationally and globally can.

Horses for Sources says it began to see that businesses were already seeking other business benefits beyond cost savings from their outsourcing endeavors. And as the recession ebbs, the research firm expects more businesses will expect even greater business benefits.

Also of note is when asked if they are more or less likely to increase investments in IT-BPO outsourcing services in the next 12 months, especially in light of the recent recession, most companies responded that they will increase or keep as is their investments in application outsourcing and IT infrastructure outsourcing. The report states that more than 50% of firms surveyed intend to increase the scope of their existing IT outsourcing engagements.

As I mentioned in the beginning of this blog, there’s a lot more interesting info in this report. Kudos to Horses for Sources on its new move to become a research firm dedicated to outsourcing, and thanks for turning out a very informative report.