IT Outsourcing: on the road to recovery

Boom time for new market entrants?

It’s been a curious time for those involved in outsourcing for the IT sector. An increasing number of organisations have spent the last year cutting costs, rationalising and consolidating in an attempt to gain a financial foothold after the recession, and the result has been a sharp reduction in growth in ITO throughout industry as a whole.

If that isn’t enough, new laws have been passed over in the United States to prevent government departments in Ohio from offshoring IT projects - a move described as ‘discriminatory’ and ‘protectionist’ by service providers in India, and one which sets a potentially dangerous precedent.

However, it’s not all been bad news - in the last week there have been signs that outsourcing in the IT sector is once more showing signs of life, with Gartner Research showing that 40per cent of organisations are planning to boost spending on external IT services.

But if it’s true that we are starting to see some light at the end of the tunnel, then where are the opportunities for today’s IT service providers?

The public sector is always a thorny issue, and the government’s recently announced austerity measures mean that cost-cutting has been the name of the game for many government IT departments.

Despite this, last week saw BSG win a contract to supply core applications and IT infrastructure for The Nursing and Midwifery Council (NMC), while Bridgend County Borough Council has renegotiated a deal to host its COA Solutions e5 financial accounting system with 2e2. Are these the first signs that the public sector is leading the charge for outsourced IT services?

Perhaps, but then again, it’s equally likely that we could see a change in the way that IT services are outsourced in the public sector. At present, many IT deals are structured to suit big-name vendors who charge premium prices because of their brand.

However, we could start to see deals that appeal more to smaller, lesser known service providers who are able to offer a more cost-effective service, at a fraction of the price of some of the bigger names.

Of course, that’s not to say that the big name service providers are a dying breed. Indeed, many are suggesting that Mark Hurd, newly installed on the executive team at Oracle, will be looking to make a major acquisition to enable them to challenge the likes of IBM and Hurd’s former company HP in the IT services market. Is this yet another indicator that ITO is on the increase?

Of course, as with any form of outsourcing, the real opportunity for the IT sector is to provide a level of service that meets customer needs, and provides a fit that will allow them to meet their business objectives. As long as service providers continue to deliver this, then there’s no reason why ITO shouldn’t thrive in the months and years to come.