Outsourcing – Lowering Costs

  • March 2, 2011
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Nowadays business groups choose to outsource not because of using it as a strategy, but to lower costs, a short-lived tactical measure.

According to a survey recently held by Gartner, which was conducted among 945 individuals in regions such as America, Europe and Asia. It reported that, while strategies involving IT Outsourcing can be included in a corporation’s lasting success in the business, a number of corporations around the world are still concentrating on tactical outsourcing as a very useful means of cost reduction.

Still according to the survey, “controlling/reducing operating costs or improving efficiencies” was described by over half of the respondents from each region as the principal advantage they anticipated to get from IT outsourcing. Deals involving efficiency are centralizing on cost control and, through time , cost reduction having the objective of consistency maintenance in service delivery. It also said that only few organizations used IT outsourcing as a means on improving
business competitiveness.

Allie Young, research vice president for Gartner’s sourcing research group, stated that “One of the great clashes in the market today is driven by the dominant use of outsourcing to cut costs, along with requirements for customised services.”

“Only by foregoing customization and moving to standardized services can the market effectively and reliably deliver the cost efficiency goals,” she adds.

“Achieve cost take-out” was said to be the main driver of outsourcing IT, having big time companies more usually recognizing this driver than any other one. Others rated “achieve speed, agility, flexibility” and “gain access to technical expertise and skills” as the top drivers accordingly.

This survey revealed various differences in some regions and vertical markets. Financial services, government, process manufacturing, services, transportation and wholesale/retail organizations all classified cost take-out as the top driver of IT outsourcing.

Respondents in North America identified “improve IT service to end-users” as their leading driver.
Data security and privacy issues were the top two inhibitors to IT outsourcing while concerns around the potentially high costs of outsourcing follows in.

Young also said that companies are now burdened with a growing concern regarding losing control of their intellectual capital and their key employees’ business knowledge having duties threatened by outsourcing, especially the occurance of downsizing. These companies must check out cautiously the objectives they are trying to attain from outsourcing. This can also help in educating corporations regarding realistic outcomes.


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