Outsourcing rates a positive picture

Now that globalisation and B2B e-commerce are driving us to collaborate with other companies, there can be few objections to outsourcing of computer services, says manager of IDC Australia's professional services program Merv Langby.

"We are moving to horizontally structured business processes, so a horizontally integrated IT structure makes sense."

There is, and will be, an increased demand placed on business processes, both in terms of closer links with customers and suppliers, and the 24x7 availability they require, Langby said.

"You have to provide a lot more integration [between your Web processes and] your internal systems", and few companies have the people and the resources to do that, he said.

Figures on expertise available to user companies in-house show the shortage to be worse in NZ than in Australia.

"It quickly comes to the crunch point where you have to consider what is your capacity and what should be your core competencies", and this may lead you to a third party to provide some services.

He doesn't like the term "outsourcing", as its definition varies so much.

"It's a term that's been misused and abused. I look at the entire spectrum of third-party provision of services", from short-term contracting of code cutters to long-term strategic collaborations.

"Formerly you might have said ‘IT services', but more and more of what's provided in association with IT outsourcing includes a strong business element."

Earlier this month IDC presented findings on use of third-party services in Australia and NZ - the motivation for doing it and its degree of success in the region.

The figures show a positive picture of outsourcing experience. "Satisfaction rates are quite high" - though in hard terms, the survey results show only 40 per cent of companies fully satisfied. There have been high-profile cases of large organisations, including Australian state departments, dissatisfied with outsourcing contracts; but Langby puts this down to change of perceived requirements over a contract period that could last from five to 10 years.

Failure and dissatisfaction often comes from an attempt to expand the contract terms, he said. Companies in the region, however, do little systematic benchmarking to establish whether outsourcing arrangements are performing satisfactorily.

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