'Selective' IT Outsourcing Takes Hold

Procter & Gamble's sweeping contract with HP commanded headlines Friday but most companies are more cautious, experts at the IT Infrastructure & Management show say.

BOSTON -- Hewlett-Packard's sweeping outsourcing contract from Procter & Gamble commanded headlines Friday but others are more cautious, experts at IT Infrastructure & Management Conference & Expo said.

"You will still see a few big multi-billion dollar deals here and there," Corey Ferengul, a vice president at the IT research firm META Group said in his keynote address. "But most companies are looking at the micro level."

Companies are increasingly interested in pushing many non-core IT tasks to third-party providers, Ferengul said. Examples range from call center systems to Web hosting to data storage management.

Other speakers at the two-day show called this "selective outsourcing," which weighs the cost savings of farming out work with concerns about surrendering security and control.

"Selective outsourcing can revolve around specific locations, or applications," said Peter Weber, president and CEO of SevenSpace, an IT outsourcer for mid-tier clients. "You don't have to give up your entire operation."

Weber, and other members of a panel, listed several suggestions for companies or organizations considering outsourcing: ask for references; assign someone in-house to oversee the project; and be sure the system works with your existing systems and can be expanded.

Hank Marquis, vice president of Opticom, a maker of software that measures IT performance, said analysis is an important and often overlooked part of the outsourcing process. By knowing uptime and network traffic statistics, service shoppers can build incentives into their deals. And when it's time to renegotiate, they can verify the information from the outsourcer.

"Trust but verify," Marquis said. "Make sure you are getting what you are paying for."

It's still very early in the evolution of outsourcing to make solid predictions and differing definitions of what comes under the heading only complicate the matter.

Most speakers agreed that the practice now accounts for between 10 percent and 25 percent of corporate IT budgets. In the private sector, there is no easy profile that these users fit.

Weber said the state and federal governments, which are under severe pressure to cut costs and waste, are big outsourcing customers.

One of the largest concerns about outsourcing is the loss of high-paying IT jobs to China, India and elsewhere. While companies are sending a record amount of work overseas, it's not always the right move.

"It depends on how much labor is involved," said David Schatsky, the conference co-chairman, and a senior analyst at Jupiter Research. "If an executive is saying that 25 percent to 30 percent of IT work must be done offshore that can be a perplexing mandate. There may be no rational business reason but that's the number that gets thrown around."

Editor's note: The IT Infrastructure & Management Conference & Expo is produced by the parent company of this Web site.

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