Original URL: http://www.theregister.co.uk/2007/03/09/it_outsourcing_survey/

IT outsourcing not catching on with small.biz

Why are they missing the boat?

By Ciara O'Brien

Posted in Small Biz, 9th March 2007 10:52 GMT

Small firms are falling behind in outsourcing IT functions, a new survey has revealed.

According to research by the Irish Computer Society (ICS), IT outsourcing has become common practice in Irish organisations, with some 72 per cent taking advantage of the services.

Smaller IT departments, however, appear to be holding on to their services inhouse, despite the traditional assumption that these firms would be more likely to farm out their IT applications.

"The fact that small organisations in Ireland are outsourcing IT services less than their larger counterparts perhaps suggests that outsourcing service providers do not focus their sales efforts on smaller firms," author of the study, Brian Kennedy of Lake Communications, said.

"However, a more worrying alternative explanation is that smaller organisations do not yet fully appreciate the relevance of IT in achieving strategic goals and sustainable competitive advantage over the long-term."

The study found that the most popular reason to outsource was to allow firms to offer extra IT services while concentrating on core competencies, rather than an attempt to reduce costs - although cost reduction is a consideration.

Less than four per cent of organisations outsource their IT functions completely. Some of the most outsourced services include hardware maintenance, application development, and application support.

"The complexity of managing information within organisations is increasing, requiring more resources to successfully administer," the study said. "Coupled with this fact is the information technology/information systems functions attempt to align itself closer to the organisation, grow its business value and subsequently move up the value chain. Outsourcing is seen as a method of achieving both of these outcomes."

The main reasons why 28 per cent of the Irish firms questioned haven't opted to outsource IT services are: uncertainty about the providers' ability to supply the required level of service, apprehension about gaining outsourcing benefits and goals, and concerns about the management of the outsourcing provider.

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