Outsourcing Benefits Extend Beyond Cost Savings

Customers are seeing benefits other than lowered costs, such as tightened security, improved infrastructure, reliable backup, and easier access to new technology.

Customers are enjoying significant benefits from applications hosting and outsourcing services, according to a new survey by the Information Technology Association of America (ITAA). The most commonly cited benefits include high return on investment, cost savings, enhanced security, improved infrastructure, reliable emergency backup, and access to new technology.

ITAA conducted the survey of current customers in multiple industries. The March 2002 survey covered issues such as current use, market differentiation, performance metrics, and return on investment. The poll included 80 ASP customers, with 37 percent of respondents describing their job title as either CIO or MIS director.

Customers registered solid approval of the ASP value proposition in the survey. Of respondents, 39 percent reported a return on investment of between 10 and 50 percent, while an additional 14 percent of respondents placed it between 51 and 100 percent.

The data suggests that much of the benefit of using an ASP goes beyond simple cost savings, although respondents said cuts in staff and cost were motivating factors in deciding to outsource (81 and 71 percent, respectively). These other benefits included security, enhanced infrastructure, emergency backup capabilities, and exposure to emerging technology.

More than 60 percent of respondents rate the level of service provided by their application service provider (ASP) as "high" or "extremely high." Service availability was the most commonly used factor for measuring ASP performance (74 percent), followed by operational reliability (45 percent) and response time (36 percent).

Three out of four respondents said they're currently using an ASP for the first time. Companies expanding their ASP use were most likely to do so in areas such as database (27 percent), accounting/finance (23 percent), and e-mail/office productivity (19 percent).

A majority of survey respondents fell in the small to midsize range (55 percent report less than US$100 million in annual revenue), although most (65 percent) also said their firms operate more than one multi-server data center. Another 57 percent said they have been using their current ASP for more than one year.

Source: Business Outsourcing Institute 03/02
Reprinted : September 2002