Recession set to boost outsourcing

Survey of more than 200 outsourcing service suppliers finds 40-plus percent of those polled had seen increased demand levels, despite economic downturn

Demand for outsourcing is set to outpace business investments in hardware and software as the recession hits home, says a new survey.

The outsourcing industry will benefit from end-users needing to cut costs, particularly in the short term, according to a survey from sourcing advisory firm, EquaTerra.

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The survey, compiled among more than 200 outsourcing service suppliers, including companies such as Accenture, Atos Origin, Capgemini, IBM, Infosys, and Wipro, and EquaTerra's own consultants, found that more than 40 percent of those polled had seen increased demand levels, despite the economic downturn.

Demand was stronger in Europe than North America (64 percent of E.U. advisors cited increased demand compared to 25 percent in the Americas). However, 38 percent cited economic conditions as causing buyers to slow or defer outsourcing efforts.

The survey suggests that outsourcing projects are changing, with a strong focus on quick return on investment replacing longer-term initiatives to improve end-to-end business processes.

Martyn Hart, chairman of the National Outsourcing Association, says, "Outsourcing has always been associated with cost savings and now with all companies setting aggressive cost saving targets for next year we may see more and more outsourcing contracts come to fruition."

There is a also a longer-term trend toward supplier rationalization in order to simplify sourcing and governance efforts. This is because buyers are seeing an increased cost and complexity from employing multiple providers in overlapping functional areas. As Hart explains: "With the focus moving back onto cost as the main deciding factor in outsourcing, having one outsourcing supplier will minimize management, due diligence and supplier selection costs."

Stan Lepeak, EquaTerra's managing director of global research, explains that "leveraging software tools to automate and improve governance operations will be central to achieving business case objectives for multi-provider outsourcing efforts."

Computerworld UK is an InfoWorld affiliate.

This story, "Recession set to boost outsourcing" was originally published by Computerworld UK.