IT Outsourcing Percentage Highest in Five Years

IT organizations are committing to outsourcing this year at the highest rate since the Great Recession.

The new IT Outsourcing Statistics 2017/2018 study from Computer Economics finds that while organizations aren’t broadly increasing the number of functions they choose to outsource, they are increasing the amount of work they send to outside service providers. In other words, more companies are choosing to tap into certain skills from outside organizations so they can focus on mission critical skills in-house.

As shown in Figure 1 from the full study, the percentage of the total IT budget being spent on outsourcing rose from 10.6% in 2016 to 11.9% in 2017. This represents a major increase as organizations have hovered between 10.2% and 10.6% for the previous four years.

“Not surprisingly, IT security was the fastest growing function being outsourced. The variety of threats and the danger they pose increase yearly,” said David Wagner, vice president of research for Computer Economics, based in Irvine, Calif. “Finding and maintaining the right skills to meet these threats can be a challenge. Turning to experts to supplement internal IT security skills is a wise choice for most organizations. Other areas growing quickly included disaster recovery and network operations. Like security, these are areas that are important, but require specialized skills that are not necessarily core to the business.”

Here are other key findings from our IT Outsourcing Statistics study this year:

  • Outsourcing is becoming more attractive to all organizations. But large organizations are growing IT outsourcing budgets the fastest. At the median, large organizations have increased the percentage of their IT budgets spent on outsourcing from 6.3% to 8.7%. Small organizations are now spending 7.8% of their IT budget on outsourcing at the median this year, compared to 6.7% last year. Midsize companies have increased their spending at the median from 4.7% to 6.5%.
  • Application development is the most-frequently outsourced function in the study. In these times of relatively good economic growth, 37% of organizations that outsource this function are planning to increase the amount of work they outsource. Application development continues to take larger parts of the IT budget, and many IT organizations are looking to optimize internal staffing through selective use of outside development firms.
  • Organizations that outsource are favoring help desk and web operations as functions where they are moving the largest percentage of work to service providers. Much of this work involves commodity skills that many organizations find easy to send to service providers.
  • The IT functions with the greatest potential for successfully reducing costs through outsourcing are help desk, desktop support, disaster recovery, and data center operations. The economies of scale that service providers can offer makes these areas good opportunities for cost savings.
  • The functions with the greatest potential for improving service through outsourcing are IT security, disaster recovery, application maintenance, and database administration. IT security and disaster recovery, especially, are areas where the motivation to outsource has less to do with saving money and more to do with having the job done better than it can be done in-house.
  • The outsourcing of disaster recovery delivers the best value when looking at both cost and service delivery. Outsourcing disaster recovery is the only function that has a high cost success and service success rating. For other areas, there is generally a tradeoff between saving money and improving service levels.

In the full study, we profile outsourcing activity for 10 IT functions: application development, application maintenance, data center operations, database administration, desktop support, disaster recovery services, help desk services, IT security, network operations, and web operations.

For each IT function, we measure the frequency and level of outsourcing. We also look at the current plans of IT organizations to increase or decrease the amount of work they outsource. Finally, we examine the customer experience to assess whether organizations are successfully lowering costs or improving service through outsourcing.

Source: IT Outsourcing Percentage Highest in Five Years

Why Donald Trump should take the Infosys CEO gig

There’s only one thing in our world that keeps Donald Trump off the headlines… of course… it’s good ol’ Infosys! Yes, folks, we actually seem to care more about who is attending these board meetings and squabbling about the cost of refueling the company jet, than the nuclear warheads currently pointed at Pyongyang.

Yes, people, the $10bn Bangalore-headquartered outfit is trumping Trump in the media… an exclusive on what Murthy had for breakfast is far more interesting these days than the handbag Ivanka just purchased. And the eighty-seventh article analyzing just why poor ol’ Vishal wasn’t quite leaping for joy every morning during his tenure, is clearly more impactful to our lives than the US government potentially shutting down, because Donald wants his wall built…

But there is a solution: Donald Trump can avoid impeachment, quit the Prez job and take the reigns at Infosys. Where better to make something great again, where he will hog the headlines more than anyone has… ever! Just think: Trump + Infosys… we will never need to read about anything else again. Ever.

Why this would be Donald’s dream job:

1) Build a wall around Electronic City to keep out the TCS and Wipro headhunters. Then rename it Trump City.

2) Repeal Murthycare without the need for any new ideas. Just get rid of it and think of something later.

3) Tweet incessantly about how much he hates Abid, Frank, Premji, Vishal, Meg, Ginni, Murthy…

4) Ban the Times of India and Livemint from all press briefings – only allowing in the new Trumposys Monthly magazine

5) Invest the whole $6bn warchest in Infosys Russia. Including a state-of-the-art Kremlin Lab that Putin can open personally

6) Put Sean Spicer in charge of the Artificial Intelligence strategy

7) Impose a travel ban on all robots to keep the FTE model intact

There you have it folks… bring on the Trumposys!

Source: Donald Trump should take the Infosys CEO gig

What’s The Difference Between “Partnering” And “Outsourcing”?

The terms “partnering” and “outsourcing” are thrown about so frequently …. and in so many contexts …. that it’s hard to nail down an exact definition for either.

These two practices are becoming ever so common among the business community, and although the distinction between them is becoming increasingly blurred, they do have distinguishing traits, which bear consequential benefits and risks.

It has been said that the practice of outsourcing should be looked upon not as a simple customer-vendor relationship, but rather as a partnership where the engaging parties mutually benefit from their agreement. While this may be a sound management practice, and while outsourcing shares many of the same characteristics with strategic alliances, outsourcing should be recognized as its own distinctive tactic.

Outsourcing is the contracting of services via monetary means in order to minimize or limit the resources that would normally be required to perform business functions internally, thus reducing costs.

A partnership, on the other hand, does not necessarily involve monetary payment from one firm to another, or a binding contractual agreement between two companies.

Rather, it is a partnership in which business entities collaborate with one another in order to bring about mutual benefits. This partnership can range from a loose and informal one, to more formal joint ventures, which involve legal measures to set parameters. Such alliances might include practices such as the partnering of manufacturers and retailers in order to reduce logistics costs, or the engagement of hardware and software development firms to create competitive advantage through synergy. Indeed, there are almost infinite ways in which strategic alliances can be formed.

The point here is that outsourcing and the formation of strategic alliances, while similar in some ways, are normally used to achieve different outcomes and involve different methods of binding between the participants.

Partnering will be used more and more in these hard times. If I outsource a job to you, then you are paid a fee to complete your services regardless of the outcome of the project under which your services were rendered. If on the other hand we partner on a project, while you are not a partner per se, I would expect you to provide your services contingent upon the success of our project. If the project failed, you would not get a fee, but if the project were a success, you would expect a much larger fee for your services than if you’d been hired as an outsource.

Source:’s The Difference Between “Partnering” And “Outsourcing”?

The fatal flaw of outsourcing

Outsourcing strategic value streams, process or resources is a bad idea. You lose flexibility and responsiveness. As soon as you move from a collegial all-in-this-together relationship to a contractual you-serve-me relationship, you promote a blame culture. That’s the fatal flaw of the whole idea.

Why outsourcing important stuff sucks:

1) Suppliers have always been scapegoats. That’s the fatal flaw of outsourcing: it is inherently a blame relationship. When things go wrong, accountability pressure flows out any holes in the perimeter of the organisation. Providers are on the defensive.

2) Outsourcing drives us from a collegial internal relationship to a contractual external relationship for the same resources. Providers have to protect themselves. There is no way in God’s green earth that this is going to be as flexible and responsive as sourcing the resource internally.

3) It might be cheaper but only because you get a commoditised product: one size fits all, lowest bidder, lowest common denominator. The moment you want customisation, the cost is back where you started, or more. The high-value bespoke service providers all play that game: bid low to get the business then make a killing on changes.

4) The higher-value your system, the more locked-in you are to your provider: it becomes exponentially harder to switch.

5) A service provider will always act in their own interest, whatever bull they spout about partnering and common interest. If it comes to the crunch, when times get hard, you lose.

Therefore it only makes sense to outsource commoditised resources such as hardware, networks, telecoms, storage, and servers.
You can outsource a call centre but you shouldn’t outsource a high value service desk.
You can outsource your server cloud but you shouldn’t outsource your continuous delivery pipeline automation.
You can outsource basic programming but you can’t outsource design or development.
You can outsource systems of record but if they hold your systems of differentiation they have you by the balls.

It is the elephant in the room of most DevOps discussions that DevOps inherently assumes internal control of high value resources and activities. Does DevOps work when you have outsourced control of your key value streams? I’m investigating and learning. I welcome comments.

Source: fatal flaw of outsourcing 

Infosys gives up its American Dream

Once dubbed the “Indian Accenture”, being the Indian heritage outsourcer with the high-end reputation, the firm now finds itself enduring, perhaps, the most difficult period of its history – and it could be poised to get a hell of a lot worse.

Vishal Sikka brought energy, fresh ideas, hope… and a Silicon Valley mindset to its leadership when he came aboard amidst his Design Thinking and jeans-to-work attitude just three years ago. However, all Sikka’s energetic ideas and innovations have been largely forgotten over the past year, as the public spat with Founder Narayana Murthy gathered irritating momentum and completely slammed the brakes on the momentum Sikka had sparked. Sikka had woken Infosys up to its potential and the Founders were more obsessed with his use of the corporate jet than making the acquisitions the firm needs to be competitive.

From the poster boys for innovative offshoring, epitomized in Thomas Friedman’s seminal “The World is Flat” through to the constant public interventions in corporate affairs by Murthy, Infosys has had a bumpy ride over the last decade of its short history. And to magnify its issues, all of Murthy’s interventions have been played out in public, with the Indian press the grateful recipient of endless reams of news fodder being provided by this corporate soap opera.

Vishal Sikka’s resignation grinds to a halt this public transition from the Founders’ generation to becoming a “normal” corporate company. Without a doubt, this episode will find its way into economics textbooks for future students to learn the lessons in strategy, corporate governance and beyond. However, at least decisive action has been taken, and Murthy and his founders can try and restore a stability that ends this public drama. This is just a bad time to go through such a strategic leadership nightmare, when competition is at its most severe, with too many suppliers chasing too few contracts and margins under extreme pressure. This is especially troubling when you consider Sikka has kept the revenue and profitability ship progressing well, maintaining profit margins close to 25% and revenue growth over 5%, even at a time when the industry growth is flat and political stances towards offshoring are heated, with several US deals being awarded to “Western” suppliers:

Click to enlarge

So what are the lessons that can be learned from all this?

Murthy is the dominant father figure of Infosys and he has made that very clear with his actions. As founding CEO, he is synonymous with the early success, the culture, but more crucially, with the decision-making at Infosys. When SD Shibulal, another of the founders, took over it was difficult for him to step out of Murthy’s shadow. Shibulal’s “Infosys 3.0” strategy was designed to address the over-dependence on the US market (see interview) and rebalance the portfolio by building out IP-based platforms, namely the EdgeVerve portfolio. But he took also the bold step to sign the first Intelligent Automation partnership with IPsoft at the time. Yet, the sales engine continued to stutter which remained the dominant feature of Infosys recent history.

This provides the background to the stage on which Vishal stepped, when he was appointed CEO in June 2014 (see post). Vishal was not only the first “outsider” but more importantly not part of the Founders’ generation to take over the reins at Infosys. Being Indian, yet working in California with a strong product background from his time at SAP he ticked a lot of the boxes in order to return Infosys to its erstwhile glory as the beacon for innovation that Thomas Friedman had so eloquently and prominently described. Vishal’s strategy focused on aligning Infosys around automation and AI to re-emphasize the heritage in innovation and Design Thinking, but also to boost the balance sheet as the industry is going through the secular shift towards non-linear growth and outcome based offerings. This was underpinned by an influx of executives from SAP meant, in particular, to help drive the platform and product business.

However, the narratives around automation and AI were never succinctly explained and, more importantly, not driven consistently through the organizations. For instance, the teams at EdgeVerve were waiting for guidance from the teams at Mana and vice versa. Without consistent narratives, it was difficult for the sales teams to leverage those capabilities in client discussions. Similarly, Mana was announced with great fanfare as the answer to all automation challenges. What Mana actually is, is a compelling analytics engine. It took another Confluence (Infosys’ main customer event) this year to finally launch a holistic automation framework called Nia. But at this year’s Confluence, Vishal appeared to HfS as being despondent and at times disconnected leaving us to speculate that he might resign or be pushed to step aside. Yet, when he did at this conference an AI tutorial, he appeared to have his old sparkle back. Innovation and discussions with thought-leaders seem to be his passion. And his passion offered something different to an often guarded corporate world.

Undoubtedly, current clients will have questions about where this leaves them. Not only was the firm’s latest CEO the driving force behind the firms shift to analytics, automation, and AI, but Vishal’s appointment also saw the CEO’s office take personal responsibility for key clients in a bid to strengthen relationships and develop and solidify revenues from current client engagements. The whole corporate strategy will change dramatically, should the new incumbent come in with different ideas, and in the process likely shake and disrupt progress to solidify client relationships.

The Bottom-line: Re-igniting the sales and marketing engine is critical

Infosys has to reignite the sales and marketing engine and prove it has genuine distinctiveness when competing with the likes of Accenture, Cognizant, TCS, HCL and Wipro. Clients need to know what Infosys stands for, and why they should pay the top dollars to invest in this company, when there is so much intense competition making more impressive noises at present. While Vishal Sikka hit the ground running with a whole suite of ideas and innovations, these have largely dissipated over the past year amidst the public infighting. Without consistent financial performances, all the innovations will more or less evaporate and Infy will be left battling it out for low-margin transactional IT contracts. Infosys 4.0 (or whatever it ends up being called) needs a new dynamic CEO, it needs an aggressive sales leader, and a CMO that can articulate what the company is trying to do next and what it stands for. Merely parroting the insufferable fluff about digital and outcomes will not work – Infosys needs to lead India’s innovation, not merely to make up the numbers.

On the positive side, any incoming CEO will have a strong set of assets to build on, which have enjoyed significant investment. First and foremost, Infosys analytics and data management prowess, strong products including Finnacle as well as many automation assets integrated into the Nia framework. There has also been solid investments in its US delivery, most notably in Indianapolis and Texas. However, Vishal’s resignation is likely to complete the power shift back to Bangalore. Many of the California-based executives will either jump ship or be pushed out very quickly. The crucial question though is whether the group of Founders will continue to interfere in public or whether they finally take a back seat and demonstrate confidence in any incoming CEO and his executive team. If the latter is not being addressed, any new king will wear very old clothes.


Source: gives up its American Dream

6 Reasons for Outsourcing Your IT Support

More and more businesses are deciding to outsource their IT support instead of maintaining an in-house IT support team. There are quite a few advantages to doing this, including the six listed here.


Outsourcing your IT support will save you a lot of money

On average, an IT support manager commands a salary of £35,000 to £40,000 a year, every year. Then there’s the costs of finding a new manager if and when your current one leaves, then finding and hiring other team members, as well as keeping their training current.

For small or medium-sized businesses, a salary of such a size is too much, but the costs of having a part-time IT manager, or of relying on untrained or less-experienced staff can far outweigh this once things go wrong.

If you decide to outsource, you need to look at getting your IT support from or a similar company. This means you’ll be paying a fixed monthly fee, which is easy to control and budget for.

An outsourced service can act as a back-up for your existing team

If you do rely on a small or part-time team, then using an outsourced support service can help them – and ultimately you. If you have a small team, or just one guy, then what do you do in a serious situation or when he or she’s on holiday? Having a widely-experienced crew on the end of the phone adds an extra layer of security to you; plus, the outsourced team can spot problems brewing.

You’ll save money on recruitment fees

We all know how expensive recruitment can be. It’s also very time-consuming and stressful, especially if you have no idea about IT and your main question is “…so, you know all about computers, then?”

Outsourcing bypasses all of this – you’ll be guaranteed an experienced team who don’t need to show you their CVs and tell you about their hobbies.


It frees you up to concentrate on your business

Every business knows how much time is lost to IT problems – very often trivial problems, too – and these glitches mean you miss phone calls, meetings, your accountant and, of course, your customers. Constant small hassles cost time and money, and that’s before the big ones hit!

Outsourcing your IT support makes you more productive

You may think that asking your staff members to look after their own IT hygiene and after each other’s saves money, but it really doesn’t. Everyone will lose a few minutes a day sorting out error messages, showing new hires how to handle that printer and saying “…turn it off and on again…”

Once you outsource, you’ll just have to make a call and someone will be there to make it all go away (as it were). This means that only one person is held up, rather than two!

Outsourcing means your IT support always has the latest training

IT teams need to keep their training current and up-to-date and this costs money. If you’re bearing these costs year after year, it racks up and it never ends. IT support services benefit from training partnerships with big developers, as well as better economies of scale, so you’ll feel these benefits as well.


Source: Reasons for Outsourcing Your IT Support

Predictions, Redactions

At their annual Gartner Symposium event in Orlando yesterday, Peter Sondergaard predicted:

“AI will be a net job creator starting in 2020”

To that, Jason Hiner at TechRepublic snarkily commented

“Gartner’s research chief couldn’t have opened the company’s flagship conference with a more astounding proclamation if he had claimed that next year’s event would be held on the International Space Station and Gartner was offering free rides.”

Actually, I agree with Peter – I wrote  a whole book, Silicon Collar which looks at a century of automation and how humans go through panic attacks every couple of decades about automation and impact on jobs. Automation tends to target tasks, not complete jobs. In general, it transforms jobs, not destroy them. And societies have “circuit breakers” which slow down rapid mass adoption of automation technology as I wrote here.

What I would I have liked to hear from Peter was “we were too pessimistic just 3 years ago”, when he said from the same podium

“Gartner predicts one in three jobs will be converted to software, robots and smart machines by 2025…New digital businesses require less labor; machines will make sense of data faster than humans can. By 2018, digital business will require 50% fewer business process workers.”

And I would liked him to say “we really fxxked up” when we predicted that by next year (2018)

  • 20 percent of business content will be authored by machines.
  • more than 3 million workers globally will be supervised by a “robo-boss.”
  • 45 percent of the fastest-growing companies will have fewer employees than instances of smart machines.

In contrast, Oracle Co-CEO Mark Hurd shared with the OpenWorld audience a few hours later some of the “mean tweets” as he called it about some of the predictions he has been making about the cloud market.

Later in a Q&A, I joked with Mark that as an industry analyst he would have the luxury of hedging and assigning a probability to his predictions and then never publicly having to audit or redact his predictions.

Source: enterpriseirregulars-Predictions, Redactions