Gartner Says IT Services Investments Represent One of the Largest Opportunities for Cost Savings and Optimisation

Analysts Say IT Services Must Become One of the Top Strategic Imperatives for Businesses / Future of Outsourcing to Be Discussed at Gartner Outsourcing Summits Being Held in Las Vegas, London and Tokyo

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Organisations seeking to rationalise IT spending should look closely at IT services investments, because they can represent one the largest opportunities for cost savings and optimisation, according to Gartner, Inc.

"During the last five years, spending on external services has accounted for more than hardware and software spending combined," said Frances Karamouzis, research vice president at Gartner. "However, IT services continue to receive less mind share, management attention, discipline and focus than these lesser areas of spending. Going forward, the strategy, selection and ongoing management of IT services must become one of the top strategic imperatives for businesses."

Gartner said that it is generally not appreciated how large the spending on external IT services is because it is often extremely fragmented. The reality is that, in aggregate, businesses spend less on their own internal staff, equipment and facilities than they do on external IT service vendors.

"The inconvenient truth of this level of enormous IT spending being overlooked or relegated to lower levels in the organisation results in the accumulation of complacency, inefficiency, ineffectiveness and lack of agility," said Ms Karamouzis. "Organisations need to take steps now to manage IT services spending as part of wider cost-cutting measures."

Ms Karamouzis urged businesses to be realistic and take an honest look at their skill gaps, inefficiencies, ineffectiveness and communication issues, as these are often the areas that will yield the highest savings. She also recommended that businesses conduct a market scan to understand market-based quality levels and cost structures, as well as comparing insourcing, outsourcing, and hybrid and alternative delivery models. These strategies will help organisations not just to cut costs in the short term, but to manage them in the longer term.

Gartner advised that is time to critically examine alternative delivery models of all types, including business process utilities, software as a service (SaaS), infrastructure utilities and many more. A newer class of alternative delivery models is emerging, premised on predesigned, standardised solutions that are configurable (to an extent), with the goal of industrialising the market. The economic recession may well prove to be the tipping point that forces enterprises to finally decouple the business processes that must remain "custom" to the business from those that can effectively use a configurable industrialised solution.

"Managing IT costs is not just about buying the hardware and software. The big spending is in the delivery of IT services to design, build, deploy and manage those assets. The art and science of execution are where the money is and key to the savings," Ms Karamouzis underlined.

Additional information is available in the Gartner report "IT Services: One of the Highest Opportunities for Savings Given It's One of the Largest Sources of IT Spending." The report is available on Gartner's website at

Gartner analysts will further discuss outsourcing and IT services trends at the Gartner Outsourcing & IT Services Summit 2009 held in London (June 15-16). This Summit provides a comprehensive view of the entire outsourcing market - infrastructure, application and business process outsourcing, global delivery, and the use of offshore providers, as well as issues and trends about new delivery models, such as SaaS. For complete event details, please
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