Outsourcing Remains Strong


According to Nemertes’ 2010/11 “Communications and Computing Benchmark,” nearly 97% of organizations are currently using or planning to use some form of outsourcing, documenting a solid increase from 2009 when the figure was 85%. Currently, 73% of research participants use managed services (the largest component of outsourcing), up from 65% in 2008. In fact, managed services have seen a tremendous run since 2006, when only 27% of organizations used managed services.

Outsourcing consists of a range of options on a continuum from managed services to hosted services to Software as a Service (SaaS). Managed services typically include outsourcing management of a specific application, technology or function, often including maintenance. Usually, managed services consist of managing onsite equipment at the customer premise, though with a service such as business continuity/disaster recovery (BC/DR), onsite equipment is at a provider facility. Hosted services deliver applications via either the Internet or dedicated network using MPLS, Carrier Ethernet, or leased line. SaaS is similar to hosted services with the same delivery model. However, SaaS is intrinsically multi-tenant, on-demand, with pay-as-you-go pricing. In comparison, hosted services are often not multi-tenant, on-demand, and typically have multi-year pricing.

Several factors drive the adoption of managed services. The top reason IT staffs outsource is to save money, a driver 69.5% of organizations cited. The greatest savings results from reducing the staff and perhaps 24 x 7 facilities to house them. Providers take advantage of economies of scale to offer management and maintenance services at rates lower than it costs organizations to provide the services internally. A lack of staffing skills is the next-greatest driver: About 30% of organizations indicate a lack of internal skills as a primary managed-services driver, and about 25% of organizations identify lack of staff as a primary driver. IT leaders often decide against employing staff to manage systems they view as commodities and use those headcounts for more strategic functions.

These drivers directly reflect plans to adopt managed and even hosted services in 2011. The top managed services are for functions seen largely as commodities in IT: Network/router management and IP Telephony. IT leaders who continue to grasp internal control of network/router and IPT management should closely evaluate the cost of outsourcing versus internal management.

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Copyright © 2010 IDG Communications, Inc.

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