Outsourcing claims a third of many IT budgets

Spending by Australian enterprises on IT outsourcing has topped $5 billion annually proving it is no longer a fad but a fixed management tool to gain access to a wider range of skills and expertise.

A Deloitte Touche Tohmatsu survey of 235 companies has found Australian organisations are spending about 30 per cent of their IT budgets on outsourcing.

Around 97 per cent of those surveyed outsourced some aspect of their IT function while only eight per cent engaged in total outsourcing.

Sara Cullen, Deloitte partner and co-author of the survey, said the results reflect a significant shift from earlier research in 1997 which showed companies were outsourcing to reduce business costs.

"Outsourcing practices have extended well beyond the original goal of cost reduction; outsourcing is also more heavily used in Australia as a way of overcoming a perceived shortage of IT skills in the employment market and the investment required to keep these skills up to date," she said.

Respondents came from a wide range of public and private organisations and industries covering manufacturing, finance, insurance, utilities, transport, storage and mining.

Cullen said the report identified that a lack of outsourcing experience was a major problem confronting most organisations.

She said more than 80 per cent of reported problems focused on determining service levels, devoting enough resources to the outsourcing life cycle, negotiation and ongoing management.

"More than 90 per cent of respondents achieved their objectives through outsourcing; the question is no longer whether or not to outsource but how to do it well," Cullen said.

About 80 per cent of outsourcing contracts undertaken by respondents were short-term, three years or less.

More than half were re-negotiated annually with an average of 60 per cent extended.

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