Sell the IT department down the river

For a higher share price?

By John Oates • Get more from this author

Posted in IT Director, 29th June 2005 08:41 GMT

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Companies which outsource do better than those who don't, according to research commisioned by a company that does, er, outsourcing.

Companies which outsource business processes perform better, and have higher stock market valuations, than companies which keep services in-house, according to the LogicaCMG-commissioned report.

The research looked at the share price of companies which had announced an outsourcing deal. The study found share prices one month after a deal was announced were, on average, 1.7 per cent higher for firms which had outsourced. In five out of seven sectors firms which outsource outperform those that don't. In the best cases companies saw an 11 per cent increase in share price.

LogicaCMG, which paid for the research, believes outsourcing could have an even bigger impact on share prices if companies did a better job of explaining how they intend to invest the savings acheived by outsourcing.

It predicts the total outsourcing market to be worth £370bn by 2010, an increase of 52 per cent on 2004. British companies could add as much £9.9bn to stock market valuations.

The study was carried out by the Centre for Economic and Business Research between April and June 2005. ®