Why Outsourcing is a Popular Business Tool
The recession that hit the global economy is increasingly putting pressure on companies to reduce costs without compromising high standards of quality and operational efficiency. This is the primary reason for the fast rise of offshore outsourcing as a solution to business needs. Among the advantages of outsourcing is the possibility of acquiring staff with technical skill levels and specializations for a lower cost compared to hiring someone domestically.
Harvey Nash, a UK-based staffing and managed services firm, conducted a global survey of Chief Information Officers (CIOs) that confirmed the growing demand for outsourcing. Close to 3,000 executives were surveyed and the findings are summarized below:
- The vast majority of the CIOs surveyed, a whopping 90%, revealed that they are increasing their budget for outsourcing in 2010 and 2011. Thirty-six percent (36%) of CIOs explicitly stated that they are increasing their budgets for offshore outsourcing for year 2011.
- On IT Outsourcing, 62% of the executives surveyed outsource software application development. The other services that are experiencing high demand are software maintenance and IT infrastructure services, both at 53%. Systems Integration services followed with 22% in demand, and the last two are BPO and HR BPO. What’s interesting is that six percent of the population surveyed outsource their entire IT Department offshore.
- Close to half of the CIOs surveyed, 48% to be exact, reported to be spending 10% of their total IT budget on outsourcing. This suggests the significant role of IT and its dominance in outsourcing.
- While everyone thinks India is the top outsourcing destination in the world, their hold of the market is waning and Eastern Europe is making its way in hogging the spotlight. It has been revealed that more than one out of 10 CIOs outsource services to Eastern Europe. Vietnam, China, and the Philippines are also destinations that have made a well-regarded name for offshore outsourcing.
- The top three issues that concern CIOs and IT executives are the following: operational efficiencies, cost savings, and improving business practices. Seventy percent (70%) of the surveyed executives ranked these factors as high priority.
- Skills that observe the highest demand are closely tied between 35% to 44%. These are: business analysis, project management, business relationship management, and architecture. Between 21% to 28% are IT strategy, development, testing, and services management skills.
Service models are also growing in variety as companies seek to improve the dynamics between onshore and offshore operations. As this trend continuously takes over business practices around the globe, a very important undertaking is maintaining open communication lines and a healthy relationship between service provider and client company. Despite the benefits of offshore outsourcing, a shortcoming on this end can lead to higher costs incurred or even monetary loss due to ineffective efforts.