IT outsourcing continues to grow but staff reduction is not the motive

More and more firms are seeing the financial benefits of outsourcing their IT operations, it has been claimed.

Brian Robinson, research director business and IT services strategies at outsourcing analyst firm HfS Research, told PC Advisor that many companies have seen outsourcing as a way of reducing their staffing levels but many have also because it helps to streamline the way their business runs.

He believes, though, that outsourcing providers cannot sit back and wait for companies to come to them as those looking to outsource are becoming increasingly savvy and valuing the quality of service over simple financial savings.

"The average outsourcing deal size is decreasing, while the number of deals continues to increase,” Mr Robinson stated.

“The market is starting to realize that it is about engaging the provider with the best overall value proposition, as opposed to the biggest or cheapest provider."

His comments are echoed by Todd Hintze, partner with outsourcing consultancy Everest Group.

He says that while firms are still interested in being cost effective, they are now “two steps beyond reducing head count”.

Recently, two representatives at McKinsey and Company’s business offices in Zurich, Switzerland and Berlin, Germany advised firms to give the idea of IT outsourcing serious consideration.

Writing in the Financial Times, they said that the best results come through what is known as “transformational” outsourcing projects.

"Just because core operations are essential to a company, they don’t necessarily need to be run by the organisation,” a segment of their article read.

"That's the lesson businesses in a range of industries - as diverse as financial services and telecommunications - are learning as they outsource core operations."

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