Large companies plan to devote more of their IT budget to outsourcing services despite serious concerns over hidden costs.
The growing interest and fears about outsourcing are revealed today by analyst group Xephon in a survey of IS managers at 90 large companies worldwide.
The survey showed that 62 per cent of participants have partly outsourced or are considering outsourcing. But one third said that their biggest concern is hidden extra costs.
Mark Lillycrop, research director at Xephon, said that more than half of those interested are expecting to increase the proportion of their IT spend on outsourcing and external services over the next two years.
However, they are not doing it to tighten budgets. "Users are not going to outsourcing to save money, but because skills are scarce and they need people power," said Lillycrop. "In fact, many expect outsourcing to be more expensive."
"Several costs are often hidden from view during contract negotiation. They include organisational costs, as it becomes expensive to manage the relationship with the outsourcer."
Businesses are particularly interested in outsourcing their web and ecommerce operations, while keeping their databases and back-end systems in-house.
"They will farm out the front end where ecommerce skills are scarce, but want to keep back-end systems and databases in-house because customer information is becoming increasingly sensitive, and commercially it is their greatest asset," said Lillycrop.
Splitting the IT operation in this manner "poses some interesting challenges over control", said Lillycrop. "I can see a whole new generation of integration specialists setting up in the middleware space to play a pivotal role to negotiate between the internal and external side of operations."
Outsourcing often falls to the traditional service companies such as KPMG and Cap Gemini, but Lillycrop said application service providers (ASPs) would pick up the lion's share of business.
"Many vendors are reinventing themselves as ASPs" to cash in on companies wanting to have hosted ecommerce services, said Lillycrop.
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