Blue chip corporates find that most outsourcing gives them no long-term benefit, according to CIO think-tank Research Board.
Research Board is an independent institution which assesses current thinking among corporate CIOs from clients with over $5 billion turnover. Its 40 European members include British Petroleum, Marks & Spencer and Unilever and it does not receive funding from IT vendors.
Speaking at the ABT Project Leadership Conference in Chicago, Research Board partner Abigail Kramer said that only BP, which has outsourced a lot of its IT capability, is the exception to the rule. Other Research Board members have found that outsourcing all IT and computer infrastructure is not worthwhile, she said.
?They tell us there are no long-term benefits to the company. Also, outsourcing data centres realised a 30 per cent saving but those bringing it back in-house now get similar numbers.?
Kramer gave the example of US energy company Enron, which outsourced all IT provision to EDS under a $9 million contract but is now re-building its internal IT competence to 100 staff because it was concerned about lose all its in-house expertise.
But corporates are finding significant savings by outsourcing in two fields; communications networks and desktop support functions, she said. ?We found Wan outsourcing saved 25 per cent and central purchasing and help desks are the same - they are labour-intensive and not strategic to the company.?
The cost-benefit analysis of outsourcing other functions - applications development, applications maintenance, competency centres and business process re-engineering - showed mixed results for different corporates.
Kramer claimed cost does not influence a CIO?s outsourcing decision as much as observers may think. Benefits, such as the fact that outsiders can discipline IT use within the company and therefore reduce diversity in hardware and applications, have an effect. ?It [the company that outsources] can access the talent of the outsourcer?s staff. Yet outsourcers like Andersen [Consulting] attract IT graduates and are no better at holding on the them than other companies,? she said.
?Outsourcing can reduce IT expenses by 10 to 15 per cent overall but is that really compelling??
Other recent findings by Research Board members show that total cost of ownership is not important to corporates when they address the question of thin clients. ?It?s more about reliability and they will pay more for that,? Kramer said. They also feel integrated software vendors like SAP offer better value than those following a modular approach, although they dislike re-engineering their businesses to implement giant applications.
Research Board also concluded that Intel?s Pentium, Sun?s Sparc and IBM?s 390 are the most viable, compelling platforms to corporate members at present, and IBM?s Unix flavours are the only other ones that many are using.
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