Outsourcing is a major strategic initiative that is increasing in popularity. The underlying structure of the industry has recently changed with a flood of new vendors. Despite this change, key success factors remain the same: vendor maturity and a focus on formal processes.

How Popular is Outsourcing?

Over 60% of Enterprises Have Outsourced Some Function.

Source: Info-Tech Research Group, 2005 IT Priorities Survey

• Overall, 62% of small- and mid-sized enterprises (SMEs) have outsourced some function.
• Outsourcing is not related to intensity of IT services or the number of IT employees.
• Over 60% of large firms have brought some outsourced functionality back in-house (i.e. backsourced).
• Outsourcing is very popular even though half of outsourcing arrangements fall short of expectations.

Where Do the Savings Come From?

Outsourcing Savings Come from Process Improvement and Vendor Execution.

Source: Ventoro Research, 2005

• Reduction in employee cost is not the primary source of savings from outsourced and offshore arrangements.
• Process...