Survey: Skills Shortage Spurs Outsourcing

FRAMINGHAM (03/24/2000) - Companies that look to outsource may be more interested in procuring the right skills than cutting costs, according to the results of a new survey.

U.K. firm Xephon PLC found that 43 out of 90 companies with at least 7,000 employees decided to outsource because they either didn't have the right skills in-house or they wanted internal staff to work on more strategic projects.

That was certainly the case for the firm that manages Comfort and Quality Inns in 27 states. Chuck Warczak, a vice president at Sunburst Hospitality Corp. in Silver Spring, Maryland, said the main advantage of selecting USinternetworking Inc. to host and manage PeopleSoft financials was to have a team of dedicated PeopleSoft experts at his disposal.

Prior experience with a PeopleSoft implementation - which took more than two years and cost almost double the original estimates - at Choice Hotels, his former parent company, made Warczak less than optimistic about Sunburst's ability to hire the right people for the job. After Choice Hotels went live with PeopleSoft, a competitor lured away the firm's in-house experts.

"Beyond implementation, I don't think we can provide the kind of challenging environment" to retain PeopleSoft specialists, said Warczak.

In fact, some companies find that outsourcing can help retain existing employees. Many companies select an application service provider to handle more mundane tasks so their internal information technology staff can handle more complex projects, said Meredith Whalen, an analyst at Framingham, Massachusetts-based International Data Corp.

"You have to provide intangibles like cutting-edge projects [to] retain IT personnel," said Whalen.

In spite of having a dedicated in-house IT staff, even large companies are chasing certain sought-after skills, such as experience with e-commerce projects, said Xephon research director Mark Lillycrop.

He said the types of e-commerce experience companies cherish most include Web development, Java programming and understanding how to connect the Web to back-end legacy systems. "There's a huge demand for those type of skills [that have] grown up separate from the internal data center world," Lillycrop said.

Selecting an application service provider has some financial benefits as well.

Though a firm might spend $1 million in monthly fees over a three-year period to rent software, the money is spent over time rather than doled out in a lump sum to buy equipment, said Whalen.

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