Though they may be cutting back on spending elsewhere, firms are increasingly buying outsourced IT services, as they try to reduce costs and concentrate on their core business in the face of the current economic slowdown.
The three big IT outsourcers -- EDS, CSC and IBM Global Services -- are all prospering as a result, and they are running a growing number of IT installations for corporate customers.
If this trend continues and grows, it is possible that most corporations will eventually rely on outsourced IT services, and the role of internal IT departments may change.
All three of these major outsourcers reported increased demand for back-up systems with redundancy following the terrorist attacks of September 11. Many corporations now realize that having multiple locations for data and applications, and having off-site IT systems, can protect their business when a disaster occurs.
This is an understandable response to danger, especially for companies that have to respond quickly to business developments, or that rely on the availability of 24-hour mission-critical applications. It is certainly one of the reasons for duplicating data storage in remote locations.
There is also a trend towards outsourcing individual business applications or services, which is leading to a situation in which some organizations have to deal with similar numbers of outsourcers and applications vendors.
This trend has been spotted recently by US market research firm Cutter Consortium. In a report published last month, senior consultant Michael Mah wrote that of companies using outsourced services, 73 percent are using more than one outsourcing supplier. The firms said the main reasons for this strategy was that it allowed them to sign up for best-of-breed services or applications, and that it could achieve cost-savings.
But Mah warned there are potential drawbacks in dealing with multiple outsourcers. There may be interoperability difficulties, a lack of accountability, and the possibility of increased costs. However similar problems can still occur even if IT services and applications are kept in-house.
According to Mah, the research shows that many firms believe the potential disadvantages of outsourcing are outweighed by the advantages of having a far wider set of skills available to them. He also stressed that IT managers could reduce the possibility of problems by exercising careful control over their outsourcers.
The outsourcing trend is being encouraged by the development of Web services technology. Products such as BEA's WebLogic and IBM's WebSphere have given IT departments the tools to develop internal applications, and build access to external services. At the core of their IT operations a growing number of companies will outsource to multiple service vendors for applications, storage management and business processes, and they will access them through portal services.
This is the way that corporate IT infrastructure is likely to develop, with much smaller in-house IT departments that will have the job of identifying, integrating and managing the best-of-breed service suppliers. It is no surprise to find that all three major outsourcers are finding that interest in hosted applications is starting to rise.
This article appears in the Nov. 26, 2001 issue of IT Week.
