While just over half of European organisations expect to outsource more IT services in 2010, the focus now is on getting more for their money and gaining access to flexible and scalable resources rather than simply cost-cutting.
The release of the study undertaken by researchers Gartner coincided with an economic policy speech from President Barack Obama on the other side of the Atlantic in which he laid out plans to cut tax incentives given to companies that outsource services to other countries.
The aim instead was to provide a “more generous, permanent extension” of the tax credits for companies that “create jobs in America”, he added. The statement followed the passing of a recent executive order by the Ohio state governor to ban offshoring altogether.
The Gartner research, however, indicated that Europe was going full steam ahead with IT outsourcing, which still makes up the largest chunk of the market. Some two out of five organisations here plan to increase the amount they spend on outsourcing as a percentage of their total IT budget, although only just under a quarter anticipate spending more with service providers and a further 24% expect this figure to fall.
Claudio Da Rold, vice president and distinguished analyst at Gartner, said that the pressure on capital and IT operating expenditure was still being strongly felt in the region and that European organisations expected providers to generate further cost reductions as a result.
While this situation was standard in times of recession, a period of recovery usually led to a renewed focus on growing the business and operating competitively, but the scenario was more complex in Europe this time, he added.
“Although respondents in Europe are still focusing on cost control when defining their goals for outsourcing and service provider relationships, they increasingly require access to resources and capabilities, flexibility and scalability. This means that 2010 is bringing sourcing strategists in Europe a more complex set of business requirements that aren’t easier to address,” Da Rold said.
Several years of increasing interest in so-called ‘industrialised services’ accessed via delivery models such as cloud and software-as-a-service (SaaS) had now peaked, however, although adoption was on the rise. SaaS deployments were up 6.1%, for example, while infrastructure utility usage grew by 5.1% during the year.
“Organisations in Europe are expecting – or are in need of – growth, but they are still highly cautious,” however, warned Da Rold. The survey was undertaken among 205 organisations during the first quarter of 2010.
But Les Bayliss, who hopes to become general secretary of Unite, warned that public sector strikes would only deprive vulnerable people of the services they needed and would be counter-productive, turning unions into the “villains of the piece”.
“The story will get changed from government savagery to union militancy. The Tories will hit us with even more restrictive laws and working people will look away in disgust,” he said.
The GMB union, meanwhile, published research indicating that jobs losses of nearly 150,000 that had already been announced among public authorities were “just the top of the iceberg”.
A survey of the union’s officers to establish the number of jobs they were defending across the country indicated that 19,198 jobs were at risk in Scotland, 8,680 in the south east, 8,604 in the West Midlands and 8.176 in the south west. NHS Trusts are planning 36,000 job cuts and the courts 15,000.
The coalition government has not confirmed whether either the Chancellor or Prime Minister David Cameron will meet union leaders before October’s spending review announcement. But a leaked memo written by the Chancellor, which outlined plans to cut the employment and support allowance that is to replace incapacity benefit for the sick and disabled by more than £2.5 billion a year, has thrown it on the defensive.
