Businesses outsource IT for reasons other than cost

Cost-cutting is diminishing in importance as a reason to outsource IT, according to research of 630 contracts worth £14bn carried out by KPMG.

In its 2012 UK Service Provider Performance and Satisfaction study, the KPMG found 70% of businesses are influenced by cost when making their outsourcing decision. This compares with 83% in the last survey two years ago.

The results, from over 200 participants from user businesses, showed 46% said the need for better quality services was their reason for outsourcing, while 51% said it was due to a lack of in-house skills.

Lee Ayling, partner in KPMG’s Shared Services and Outsourcing unit, said the need for better services combined with a lack of in-house expertise is driving outsourcing.

“Just going for a low-cost option isn’t the de facto reason to outsource anymore. Companies are now looking at how outsourcing helps improve the quality of service they can offer to customers," said Ayling.

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Most Popular Outsourced Jobs

Outsourcing occurs when a company contracts out a portion of its business to another company; these jobs would have traditionally been done by in-house employees. It's important to make a distinction between outsourcing and offshoring. Jobs can be outsourced to local companies that specialize in that particular area. Offshoring, though still a form of outsourcing, is when a company outsources portions of its work to be done overseas. This is a growing trend as companies find that outsourcing and offshoring lead to greater efficiency and cost savings as they don't have to pay salaries and benefits to employees, and instead pay contract fees for completion of duties. This also allows companies to allocate greater resources to parts of the company that they excel at.

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