Outsourcing IT will not cut budgets

Link: IT outsourcing set for boom, analysts predict

Sainsbury’s chief information officer and business transformation director Maggie Miller said there were perfectly valid reasons why a company should consider outsourcing, such as adding flexibility and capability to an IT function or project, but cost should never be the driving force.

Speaking at the European Technology Forum roundtable, she said: ‘Most of us will be faced with accusations that our IT costs are too high but to see outsourcing as a way of cutting costs is ignorant of business logic.

‘In my view there are some superb reasons to outsource but cost isn’t one of them. What companies should be asking is if outsourcing a better way to bring benefits and that it might not be cheaper.’

Kevin Lloyd, Barclays Bank chief technology officer, said that ‘the spectre of outsourcing’ had to be handled with care. If it was just a cost cutting excercise it could rebound on companies in other areas.

‘One of the biggest challenges is how you are going to help your employees through the process. Outsourcing demands a positive response from companies,’ he said.

Whether it is outsourced or not, IT must form part of the overall business strategy and not wind up as a separate entity said Miller.

‘IT is not just about technology. A CIO’s role is in demystifying the process and we have an obligation to be flexible and respond quickly to strategic business needs,’ said Maggie Miller

But Malcolm Mitchell, director of technology business strategy at Vodafone warned that even if they managed this, CIOs faced a difficult task in persuading directors at board level of the need for IT investment.

Faced with investment constraints, CIOs must find solutions that deliver benefits in the short as well as long term.

‘The financial pressures now demand much more data to justify spend,’ he said.

However, despite this CIOs, must convince the accountants that cutting back too drastically is a false economy. According to Miller, it leaves companies unable to capitalise when the economy picks up.

The speakers said their investment in infrastructure and software over the foreseable future remained reasonably constant.

‘Our IT budgets are broadly similar to previous years, although there is a slight downward trend in hardware costs. But we have got to protect core infrastructure,’ said Mitchell.

They also believed that now is a good time to invest, as companies are getting more bang for their bucks. ‘You can get good savings on some technologies,’ explained Mitchell.

Related reading