Aussie IT outsourcing saves on costs

Dec 7, 2004: A survey carried out with 50 Australian mid-market organisations by IDC Australia on behalf of IBM has discovered that IT outsourcing in this market can achieve cost savings up to 38 percent.

IBM Global Services invited IDC Australia to interview senior IT managers from these organisations because it started to witness a rapid increase in the amount of outsourcing in this area of the market.

In fact, the outsourcing clients nearly doubled, so IBM wanted to identify the distinct requirements of these organisations to better address their specific needs.

Phillip Allen, the senior analyst for services at IDC Australia, said: "Mid-market organisations currently account for 31 percent of the overall IT expenditure in Australia but only 22 percent of the IT outsourcing (also referred to as managed services) market.

"This means that adoption of outsourcing by mid-market organisations has been under-represented. In 2004, organisations with fewer than 1000 employees will spend AUD$994 million on IT outsourcing, and this market is forecasted to grow at a compound annual growth rate (CAR) of 11 percent to achieve a market size of AUD$1,496 million by 2008."

The results of the survey also found that organisations that do not outsource may not be aware of indirect costs, or 'hidden' costs, that are not IT-related. In addition, they might not keep track of costs accurately because they often do not know the number and location of assets, total staffing levels or labour expenditures.

Allen added: "The outsourcing of IT functions can help track and reduce direct costs, as well as recoup costs of indirect costs through the management of appropriate service level agreements with the outsourcing vendor."

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