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North American Businesses Aggressively Increase Spend on IT Outsourcing

STAFF REPORT

 Businesses in North America are setting aside larger sum of money for outsourced IT services, increasing over twenty percent in 2012, says a report from IT research firm Computer Economics.

This expansion in IT outsourcing reflects recovery in IT spending, and the research firm says it expects longer-term growth in ITO. “Among organizations that outsource IT work, the percentage of their total IT budgeted for outsourcing services rose to 8.6 percent at the median, from 7.0 percent the prior year, for an increase of 23 percent,” noted the research firm.

It is a significant development because in 2011 spending on outsourcing had remained at about the same level as 2010.

As recession hit in 2008, many organizations reduced spending on outsourcing services, particularly application development. But now, given the outcome of this study, the IT outsourcing market is on its path of recovery.

“With this budget cycle, however, IT organizations are increasing both IT spending and, in a significant way, spending on IT outsourcing,” the research firm noted.

The study has also found IT organizations beginning to embrace cloud-based applications as well as expanding outsourcing of data center operations. As in the past, the desire to reduce costs is driving them to outsource.

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The use of software-as-a-service (SaaS) continues to gain strength, making application hosting the fastest-growing outsourcing service in the study.

“The number of organizations outsourcing application hosting is up nearly 37 percent year-over-year and more than half of all organizations that outsource this function are planning to increase the amount of work they outsource,” the report added.

In the meantime, the study found that advancements in data center technology are creating economies of scale for data center operators as well as SaaS solution providers.

Though outsourcing of application development surged over the past year, according to the research firm, the trend indicates slower growth ahead.

About Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.
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