Recession makes firms turn to outsourcing
Irish businesses are turning to outsourcing as a response to the recession, according to leading industry executives.
“Outsourcing is increasingly a key survival strategy for businesses in this challenging economic climate,” said Declan Ivory, general manager of data centre services in Eircom. “As organisations look to reduce costs, outsourcing certain IT operations is increasingly becoming the norm.”
Harry Goddard, partner with Deloitte, said: “With IT budgets being reduced by 5 to 10 per cent, most IT directors are having to aggressively cut costs. Selective outsourcing can help achieve this.”
Tanya Duncan, managing director of Interxion Ireland, agreed.” Outsourcing is becoming more popular as the benefits, such as cost savings, greater operational efficiencies, and increased flexibility and scalability, have been demonstrated through real life case studies,” she said.
At a global level, worldwide IT services revenue totalled $806 billion in 2008, an 8.2 per cent increase from2007 revenue of $745 billion, according to research firm Gartner.
“Vendors had six to eight months of ‘business as usual’ [operation] in 2008, and then approximately four months encountering the beginning of the global economic downturn, featuring widespread cost restrictions and cost reductions,” said Kathryn Hale, research vice-president for Gartner’s worldwide IT services group.
“The only two segments of the market that grew less than forecast were IT management and process management. This is particularly surprising, because in economic hard times the potential cost savings from outsourcing usually keeps this market segment buoyant. However, apparently buyer hesitation to commit to the long-term requirements of outsourcing agreements took precedence in 2008.”
According to research firm IDC, businesses with more than 100 employees buy four million devices, print 600 bil lion pages and spend $20 billion per year on office equipment and services worldwide. The firm also predicts that more than 60 per cent of SMEs in Europe will consider purchasing a managed print services solution in 2009.
Despite the economic downturn, the firm projects the managed print services market to become a $7.2 billion opportunity for Europe by 2011.
“Every organisation seeks to increase revenues while reducing costs and enhancing productivity,” said Mark McPhillips, general manager of Xerox in Ireland.” Based on our research, document costs remain uncontrolled and unmeasured. Document costs are 5 to 15 per cent of an organisation’s revenue, with 17 to 25 per cent of that cost directly related to document output.”
McPhillips said that documents formed a core part of outsourcing potential.” From billing to customer applications you will find that documents are involved somewhere, whether paper or electronic,” he said.” In some processes documents are of critical importance, for example, customer application forms.”
