BUSINESS
UK and Ireland lead Europe in IT outsourcing
15-02-2006
by
Britain and Ireland are ahead of Europe in terms of outsourcing low-value IT processes, but aren't as aggressive as the US in terms of reinvesting their savings.
According to Capgemini's European CIO survey, British and Irish companies currently outsource 8 percent of IT operations to offshore partners. Two Irish companies -- RTE and VHI -- participated in the study.
This compares to a European average of only 2 percent. By 2008 the British and Irish figure is expected to increase to 24 percent, compared to a European average of 5 percent.
"The rest of Europe is definitely a step behind, because of social and cultural issues, but increased competition will not give them an option," said Andrew Taylor, vice president of consulting with Capgemini, speaking to ElectricNews.Net. "
The survey also found that British and Irish CIOs are excessively focused on cost-reduction, rather than re-investing their savings in projects that would generate additional revenues for their businesses.
According to Capgemini's figures, companies that reinvest the savings from outsourcing in technical innovations enjoy a 10 percent higher rate of productivity than those who simply use outsourcing to cut costs.
Taylor said that US productivity has grown by 1.8 percent in 2005, compared to 0.9 percent in Ireland and Britain. He attributed the difference in productivity to the fact that US companies have been more aggressive in terms of reinvesting the savings made through outsourcing.
In contrast, British and Irish IT budgets are either staying the same or decreasing for two thirds of businesses and only a third are investing additional funds in new technology to make their companies more competitive.
According to the survey, 87 percent of IT spending is on relatively low-value, back office tasks such as support, infrastructure management, application management, testing and roll-out. Only 5 percent is spent on strategy and planning and just 8 percent on conceptualisation and design.
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