Where is IT outsourcing heading in 2013?

Organisations set to bring more IT back in-house

Looking to 2013, analysts have predicted that organisations will become more cautious about outsourcing their IT staff, savvier in evaluating contracts and more selective in the services they choose to outsource.

Deloitte Consulting technology leader Robert Hillard said organisations will bring more IT back in-house, as they become more cautious about the consequences of outsourcing and offshoring too much of their IT talent.

“We’re actually seeing a reduction in the number of roles going offshore,” he said. “If you want to be able to govern your IT then you need senior technology workers and you need to get them from somewhere. It is best if they have grown up in your organisation.

"If you have outsourced too many of your IT workers then you don’t have a pool of talent who are going to grow through to your next-generation of senior management… you lose access to that pool of innovation.

“I think around the world people are actually wanting to bring an amount of their IT back [in-house] and perhaps tamper some of that trend towards outsourcing, [which will] continue but not at quite the same pace… It’s very hard to outsource innovation.”

IDC head of research Matthew Oostveen said there will be shorter contracts with IT service providers, with CIOs becoming savvier in evaluating outsourcing agreements and how they meet business needs.

“What we are going to see is a shrinking of the contract length," he said. "So instead of the long-term outsourcing agreements – seven years, eight years – we’re going to see those contracts shrink down to three years, four years, five years,” he said.

“CIOs in Australia are becoming much more savvy about the business impact that outsourcing is having on their organisations.”

Gartner vice president and distinguished analyst Rolf Jester’s predictions are different to Hillard’s. He said traditional outsourcing will dominate in infrastructure service investments in the coming year. However, cloud computing and multisourcing will continue to play more of a role in this as they mature.

“Traditional outsourcing will still represent the majority of the infrastructure services expenditure in 2013, a total of $6.6 billion, compared to the much smaller IaaS [infrastructure as a service] spending of $385 million mentioned earlier. But the much faster growth rate of cloud services will see IaaS become 10 per cent of the total by 2016," he said.

“Many Australian organisations have built up mature sourcing practices, and some are using disciplined multisourcing to help achieve business outcomes. They are now looking to the next step in standardising and industrialising the operational aspect of IT.”

Telsyte senior analyst Rodney Gedda said we can expect to see more selective IT outsourcing in 2013 as there will be more providers offering “niche services… including those that make liberal use of the ‘cloud’ marketing tag”.

“The main change will be around the ability of outsourcing providers to compete with the economics of on-premise IT and how effectively a service can be delivered by a third-party in a cloud fashion that does not require a ‘hands-on’ engagement,” he said.

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Other trends to watch out for in 2013:

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