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Volume 30, Issue 1

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Tuesday, 27 August 2013 15:12

IT Budgets Rise, but Businesses Cut Back on IT Outsourcing

IT outsourcing as a percentage of the IT budget dropped this year, reversing a four-year trend and marking the first time since the start of the recession that IT organizations have begun shifting spending plans on a percentage basis toward developing internal operations and capabilities and away from outsourcing partners, according to a report by research and advisory services specialist Computer Economics.

Survey results suggested organizations are starting to "back-source" their IT services, bringing them back in-house after a period of growth in the use of service providers. The decline in IT outsourcing was reported as significant, down from an average 11.9 percent in 2012 to 10.6 percent in 2013. Meanwhile, IT operating budgets are rising 2.5 percent this year at the median, and IT capital budgets are up 4 percent.

"With the tentative improvement in the economic outlook, IT organizations are putting newfound resources into internal operations and capital investments at a pace that is greater than their spending with IT service providers," the report noted. "IT outsourcing budgets are not necessarily shrinking so much as IT budgets are rising. The denominator is rising faster than the numerator."