As the downturn continues to put the squeeze on IT budgets, CIOs are only reaching for their checkbooks for outsourcing projects that can deliver ROI (return on investment) in six months.
According to a research report that surveyed 25,000 IT outsourcing buyers, outsourcing deals that can promise ROI within 180 days are nine times more likely to get signed off than those with a two-year or longer turnaround.
The survey, by the Black Book of Outsourcing, found that projects with 180-day ROI are receiving immediate budget approval in 90 percent of organizations. Deals with one- to two-year ROI are, in contrast, receiving immediate approval according to 26 percent of buyers, while those with ROI longer than two years are getting immediate sign-off with just 11 percent.
"Few new outsourcing contracts are being awarded in the down-turned economy unless they have immediate ROIs...Organizations with approval to outsource and desperate to save money are seeking to move far more rapidly and shorten the due diligence process just to get the deal into place at the right price," the report said.
The report adds that ERP and cloud computing are among the IT outsourcing projects with relatively quick ROI.
"Nothing currently is exciting the growth of outsourcing as much as the cloud and SaaS [software-as-a-service] movements," the report said, adding cloud outsourcing is now moving up the technology stack.
Among IT outsourcing buyers in companies with more than US$1 billion in annual revenues, 82 percent said they are "actively evaluating" cloud and software-as-a-service, compared to 89 percent of those with US$500 million to US$1 billion and 60 percent of those with under US$500 million.
However, the report concludes that medium-sized businesses will be the most fertile ground for cloud growth.
"By 2018, Black Book believes that most medium-sized businesses and a few large enterprises will have cloud-outsourced pretty much all of their computing infrastructure," it said.
Jo Best of Silicon.com reported from London.
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Posted by Jake Burns on Monday, June 01 2009 10:11 PM