IT outsourcing fails to satisfy clients

More than half of Australian enterprises outsource at least one IT function, but relationships are turning ugly with many deals going off the rails.

Rolf Jester, Gartner's chief analyst for the Asia-Pacific IT services market, said only 30 per cent of services customers were completely satisfied with their service provider.

Highlighting how messy some IT outsourcing relationships have become, Jester said: "Some clients have told me they can't wait to screw a vendor for the last 2 or 3 per cent of their margin, and they bet the vendor would go out of business within 12 months because of that."

He said the services sector was an infant industry and had a lot of maturing to do. "When we meet a teenager, what do we see? Often they're bright, full of promise. But let's face it, they're lacking in maturity. They've basically got to grow up."

A recent Gartner survey on IT services users showed that more than half of enterprises outsourced at least one IT function such as operating systems, desktop, application or data centre management. Also, a high proportion of them planned to outsource some aspect of their network management in the next few years.

Jester said most organisations rated their satisfaction with service providers a five on a scale of one to 10. "This just isn't good enough [considering] the fault of a poor relationship between the two parties lies just as much with the client as it does with the outsourcer."

Jester said services firms were struggling to deliver genuine business value through IT to their clients, which called for IT managers to stop and consider what was the specific value of outsourcing to an external provider.

Outlining a check-list to help companies set parameters in their outsourcing objectives, he urged managers to question whether, for example, a support engagement for PCs was valuable; if outsourcing helped them achieve economies of scale; whether there was some capital available to use on non-IT investments; and if management had the bandwidth to manage outsourcing relationships.

Gartner analyst Chris Ambrose said an outsourcing engagement's likelihood of success increased by 50 per cent if the client knew what type of deal it wanted to enter into before the contract was drafted. "Enterprises must determine what sort of sourcing relationship best meets their business needs," he said.

- Juan Perez contributed to this article

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