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Savings, not skills, driving outsourcing

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There's been a substantial drop in the number of companies outsourcing application development in order to utilize external skills, as more companies instead turn to outsourcing for cost savings.

Just 19 per cent of those companies polled are outsourcing to tap their suppliers' expertise, down from 44 per cent in the year 2000, according to Evans Data Corp (EDC). Twenty eight per cent said cost savings was their main reason for going out of house - up from 15 per cent.

Evans, which polled 400 developers for its Summer 2005 enterprise development survey, said there has been a transition in needs from firefighting to solve the year 2000 problem to on-going, low-cost management of corporate systems like enterprise resource planning (ERP) and customer relationship management (CRM).

John Andrews, Evans chief operating officer, said: "Huge resources are being eaten up by enterprise applications. Back in that period [solving the Year 2000 bug] there was a skills shortage. Enterprises have [since] been maintaining those applications and cost savings has become a huge issue on their plate."

Unsurprisingly, outsourcing is expected to increase. Nearly half of respondents said their companies currently outsource less than a quarter of development while just seven percent outsource more than half of the development process. A third plan to increase their use of outsourcing during the next year.

The top three software development projects going out of house are service oriented architectures (SOAs), supply chain management and security, according to the analyst firm. Nearly 80 per cent said SOA and supply chain management projects would be outsourced with 77 per cent saying security would go out of house. ®

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