2003 Review of the Year: Outsourcing
By Rachel Fielding
An opportunity to improve business processes, or a danger to the UK's IT industry? The jury's still out...
Outsourcing is hardly a new concept, but 2003 was the year that it became the issue companies simply could no longer afford to ignore. In the past 12 months hardly a week has gone by without a household name jumping aboard the bandwagon.
In the past few months alone, BAE Systems and numerous financial services players including Bank of Ireland and Barclays have all nailed their colours to the outsourcing mast.
And while the UK's software and IT services industry has spent another year in the doldrums, things would have been far worse were it not for outsourcing, which it seems has almost single handedly prevented the sector from nose diving into recession.
But alongside the success stories come the warnings, in particular that outsourcing is not a 'one size fits all' solution, and that careful consideration needs to be given to internal practices, culture, business objectives and strategy.
Gartner warned that companies need to spend up to 10 per cent of outsourcing budgets on managing the projects.
And while analyst Ovum believes companies should expect outsourcing to cut costs by up to 20 per cent, other groups have warned that low wage rates among Indian outsourcing providers tell only a fraction of the story about the true cost of offshore outsourcing.
If that wasn't enough, the cost of outsourcing contracts is likely to go up after Chancellor Gordon Brown hinted that a tax loophole allowing outsourcing firms to avoid charging VAT on contracts would be closed.
But despite concerns about where outsourcing leaves in-house IT departments and the role of the chief information officer, IT directors are nonetheless warming to the concept.
Most companies plan to increase the number of IT functions they outsource next year, according to a report from investment bank Merrill Lynch.
The focus of concern has shifted from keeping a job to concerns about losing vital knowledge and managing such huge projects.
Whatever your view on outsourcing - opportunity to improve business processes, or a danger to the UK's IT industry - one thing's for sure. The outsourcing issue will continue to provoke lively debate for the foreseeable future.
vnunet.com
An opportunity to improve business processes, or a danger to the UK's IT industry? The jury's still out...
Outsourcing is hardly a new concept, but 2003 was the year that it became the issue companies simply could no longer afford to ignore. In the past 12 months hardly a week has gone by without a household name jumping aboard the bandwagon.
In the past few months alone, BAE Systems and numerous financial services players including Bank of Ireland and Barclays have all nailed their colours to the outsourcing mast.
And while the UK's software and IT services industry has spent another year in the doldrums, things would have been far worse were it not for outsourcing, which it seems has almost single handedly prevented the sector from nose diving into recession.
But alongside the success stories come the warnings, in particular that outsourcing is not a 'one size fits all' solution, and that careful consideration needs to be given to internal practices, culture, business objectives and strategy.
Gartner warned that companies need to spend up to 10 per cent of outsourcing budgets on managing the projects.
And while analyst Ovum believes companies should expect outsourcing to cut costs by up to 20 per cent, other groups have warned that low wage rates among Indian outsourcing providers tell only a fraction of the story about the true cost of offshore outsourcing.
If that wasn't enough, the cost of outsourcing contracts is likely to go up after Chancellor Gordon Brown hinted that a tax loophole allowing outsourcing firms to avoid charging VAT on contracts would be closed.
But despite concerns about where outsourcing leaves in-house IT departments and the role of the chief information officer, IT directors are nonetheless warming to the concept.
Most companies plan to increase the number of IT functions they outsource next year, according to a report from investment bank Merrill Lynch.
The focus of concern has shifted from keeping a job to concerns about losing vital knowledge and managing such huge projects.
Whatever your view on outsourcing - opportunity to improve business processes, or a danger to the UK's IT industry - one thing's for sure. The outsourcing issue will continue to provoke lively debate for the foreseeable future.
vnunet.com
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