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Why Mid-sized Firms Get More from IT Outsourcing

by: Sarah Joson

Monday, September 5, 2011 | Outsourcing News |

Mid-sized Businesses and Outsourcing

A study done by outsourcing analyst firm HfS Research and the London School of Economics shows that mid-sized companies get more out of their IT outsourcing deals compared to large organizations.

In the article “IT Outsourcing: What Big Companies Can Learn from Midsize Companies ” by Stephanie Overby at CIO.com, with the 277 outsourcing buyers who participated in the survey, 63 percent of mid-sized firms said outsourcing had been successful for them in terms of cost reduction. The report also shows that 42 percent of mid-market clients indicated that their deals have met their compliance and regulatory requirements, compared to only 30 percent of large companies.

According to HfS Research founder Phil Fersht, "Quite simply, mid-market organizations have to bundle more processes together into one broader deal to make it large enough to warrant the attention of the leading services vendors. [They] rarely will have the luxury of outsourcing step-by-step." Larger companies usually outsource services part by part over a long period of time and because of their size, they can tell the service providers how they would like to outsource.

Fersht says this type of strategy is weighing large companies down and the cut up process hinders further developments in contracts. "By and large, organizations outsource processes that probably aren't very well run in the first place. [Their] 'softly, softly' approach to outsourcing is prolonging the disruptive change a buyer needs to go through to reach its desired global operations end-state," said Fersht.

When it comes to outsourcing vendors, Fersht said they should focus not only on big clients but also those in the mid-market where contracts are more flexible.

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