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Nearshoring

Is outsourcing a first step in reducing IT costs?

date: 10 October 2011
reading time: 2 min

At the end of September analyst firm Gartner published a paper outlining 10 steps to reduce IT costs by 25%. All the steps in the guide are good ways to cut costs, particularly at a time when IT budgets are under pressure again.

At the end of September analyst firm Gartner published a paper outlining 10 steps to reduce IT costs by 25%. All the steps in the guide are good ways to cut costs, particularly at a time when IT budgets are under pressure again. But what jumped out at me, was how little importance was given to outsourcing in the list of steps.  Multi-sourcing was mentioned as number 10: Optimise multisourcing: IT leaders can make separate sourcing decisions for virtually any infrastructure and operations component, system or function and these decisions are of great importance to the business.

However, outsourcing was not picked out. It is true that cost cutting is not always the main driver for outsourcing, particularly in second and third generation projects where in-house skills have been lost. However, while there are a range of factors behind why our customers choose to outsource and in particular choose to offshore, I can honestly say that cost savings are one of the most important reasons.  Asian and Eastern European destinations generally represent a 50% cost saving on in-house development.

Surely this is an effective way to reduce overall IT costs? What’s more – outsourcing can also optimise your IT department. By freeing up time and resource, it allows staff to concentrate on more strategic work, opening up new opportunities for junior team members. Also whereas in-house teams often have wide, but shallow skill sets, IT outsourcers often have much deeper expertise.

Many companies do choose to outsource and in particular to offshore, to cut costs. In my opinion it should be one of the top five ways to cute relevant budgets.

What do you think?

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