Trends in IT Outsourcing

By: Jerry Luftman, Ph.D., Executive Director and Professor Global Institute for IT Management
and Barry Derksen, Ph.D. lec. MMC CISA CGEIT, Research Director of the Business & IT Trends Institute

The Society for Information Management (SIM) has been conducting surveys of senior IT executives for over 30 years to help IT and business leaders understand and prepare for important issues and trends. Started in 1980 the SIM survey focused solely on IT in the United States. Since 2010 the survey has been expanded by the lead author (who has been facilitating the survey since 2000) to include Europe, Asia/Australia and Latin America.

The 2013 survey sought the input of senior IT executives representing 1,232 organizations from these target regions. (See Table 1 and Table 2 for participant geographies and industry segments.)

The primary categories of the 2013 survey focused on:

  1. Management Concerns
  2. Application and Technology Investments
  3. IT Budget Allocation
  4. IT Organizational Considerations
  5. IT Outsourcing
  6. Cloud Computing

Generally, the survey reaffirmed that IT leaders globally have long been looking to outsourcing as a vehicle to reduce costs as well as to fill skills gaps (skills gap ranked 4th in the list that keeps IT managers awake at night).

Evaluating outsourcing as a whole, which includes offshoring, nearshoring and consulting of non-internal staff, the allocation of outsourcing in IT budgets has been notably increasing in Europe at 36% (compared to 26% in 2012), remaining static in Latin America at 32% (the same percentage as in 2012) and declining in Asia/Australia now totaling 35% (compared to 48% in 2012) and 20% in the U.S (26% in 2012).

Overall, global sourcing budgets as a percent of IT budget is decreasing. In 2009 the percent of the IT budget for sourcing was 67% as compared to 54.4% in 2013, with a further decline in 2014 projected at 53.5%. The 2013 breakdown by region is Europe: 58%, Asia/Australia: 56%, Latin America: 51%, and the U.S.: 54%.

Globally 58.7% of the IT budget is allocated in-house (non-outsourced) domestic. In the U.S. the figure is 73.2%, with Asia/Australia at 50.3%, Latin America at 53.8% and in Europe 53.4%. (See Figure 1.)

The percent of 2013 IT budgets allocated to offshore outsourcing in Asia/Australia (spending the most) is 10.4% of the IT budget; whereas U.S. and Europe both allocate 5.7% and Latin America allocated 7.7%. Of note, Europe has the highest percent of IT budget allocated to domestic outsourcing (32.2%), and the U.S. has the lowest with 17.2%.

Table 1 – Percentage of Respondents by Geography
Geography Total
United States

493

Europe

406

Asia

93

Latin America

178

Australia

50

 TOTAL

1232


Table 2: Percentage of Respondents by Industry  
Industry Frequency %
Agriculture

13

1.09%

Chemical Industry

29

2.36%

Aerospace / Defense

13

1.09%

Automative

56

4.54%

Business Professional Services

42

3.45%

Consumer Goods

24

2.00%

Construction

27

2.18%

Electronics / Semiconductor

13

1.09%

Education

125

10.16%

Energy

24

2.00%

Financial Services / Insurance

138

11.25%

Food Services

9

0.73%

Government – Federal

36

2.90%

Government -State

36

2.90%

Government – Local

22

1.81%

Government – other (specify)

16

1.27%

Healthcare / Medical

64

5.26%

Hospitality / Travel / Leisure / Tourism

13

1.09%

IT services / Consulting

182

14.88%

Manufacturing

62

5.08%

Media / Entertainment

24

2.00%

Medical Technology / BioMedical

9

0.73%

Mining / Minerals

24

2.00%

Printing / Publishing

13

1.09%

Real Estate

24

2.00%

Not-For-Profit – Public Sector

27

2.18%

Not-For-Profit – Charitable Institution

11

0.91%

Not-For-Profit – Other (specify)

16

1.27%

Retail / Wholesale

40

3.27%

Telecommunications

44

3.63%

Transportation / Distribution

24

2.00%

Utilities

22

1.81%

(other industry = 7 (0.6%)

1225

100.00%


Figure 1 – Allocation of 2013 IT Budget
Allocation of IT Budget Graph Luftman

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