Just do a 180
As the downturn continues to put the squeeze on IT budgets, CIOs are only reaching for their chequebooks for outsourcing projects that can deliver ROI 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 per cent of organisations. Deals with one to two-year ROI are, in contrast, receiving immediate approval according to 26 per cent of buyers, while those with ROI longer than two years are getting immediate sign-off with just 11 per cent.
"Few new outsourcing contracts are being awarded in the down-turned economy unless they have immediate ROIs… Organisations 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 $1bn in annual revenues, 82 per cent said they are "actively evaluating" cloud and software-as-a-service, compared to 89 per cent of those with $500m to $1bn and 60 per cent of those with under $500m.
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.