Survey: IT Outsourcing on the Rise

The urgent need for cost savings is fueling increased demand for IT outsourcing, according to a recent survey conducted by EquaTerra, a Houston-based IT consulting firm that tracks worldwide demand for third-party business and IT services.

EquaTerra, in its "1Q09 Advisor and Business/IT Service Provider Pulse Survey," reports that 49% of the firm's client-facing advisors noted increased demand for business process/IT outsourcing in the first quarter of 2009 (up 11% from the previous quarter), while 57% of IT service providers noted an uptick in their "new deal pipeline" for such services (a 26% increase over the previous quarter).

"We've been citing pent-up demand for outsourcing in our past two quarterly Pulse surveys," said Stan Lepeak, managing director of global research for EquaTerra. "These deals are beginning to flow as the need to control costs outweighs reluctance to initiate major change efforts like outsourcing in the midst of an economic crisis and regulatory uncertainty."

Among other findings from the survey:

  • 62% of service providers said they expect demand to stay strong in the second quarter, up 9% quarter-over-quarter and 14% year-over year.
  • More than 75% of EquaTerra's advisors reported buyers are focused on short-term (less than 12 months) cost-saving deals versus process improvement or access to external talent, and are pushing service providers to finance, defer or absorb any upfront change/transition costs.
Business and IT service providers polled for the survey included Accenture, ADP, Ceridian, Hewlett-Packard, IBM, Infosys, TCS, Unisys and Wipro.

According to EquaTerra, the global recession "has prioritized outsourcing as a tool to achieve critical short-term cost reductions and drive significant, often overdue, overhauls to back-office service-delivery models."

"Ironically, despite populist backlash, the recession is likely to break through remaining resistance to outsourcing as business becomes more adept at using the tool to cut cost and improve efficiency," Lepeak said.

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