Traditionally, outsourcing has been the domain of large companies. Latest studies in the outsourcing market are showing a reversing trend.

Outsourcing companies today are reaching out to small and medium sized enterprises as larger companies are facing tough financial challenges. This led to the increase of outsourcing adoption among small businesses.

Observers believe that outsourcing companies are doing well in communicating the value of their services to the mid-market.

Outsourced Services: Big and Small Gainers

Outsourcing services are gaining big strides in areas such as help desk, data center operation, ecommerce, and desktop support. Larger companies tend to favor help desk outsourcing. These companies are making greater use of this type of service.

There are indications that some IT functions and services are losing adherents. Specifically, application maintenance and development as well as network operations providers lost a lot of ground. These services made small gains in the outsourcing market.

Meanwhile, application development is fast losing ground. This service sector is still the most outsourced function though. But with the current economic slump, companies are cutting back on project based jobs.

Most Popular Outsourced IT Functions

Currently, companies are keen on outsourcing three popular IT functions. These functions include disaster recovery, data center operations, and development of ecommerce systems.

Outsourcing companies enjoyed high rates of success in these areas. The functions are frequently outsourced compared to other IT services.

How Companies Are Spending for Outsourced Services

IT organizations are spending about 5 to 6 percent of their IT budget on outsourced services. These percentages apply to all types of IT organizations whether they are big or small.

Applications development is said to be the costliest projects and companies are experiencing cost overruns in this type of service. Cost overruns are also common for services such as data network operations and ecommerce systems.

Meanwhile, companies are enjoying cost predictability on outsourcing services like voice network operation, data center, and system security.

Companies are hiring offshore outsourcing companies for projects involving applications development. On the other hand, IT security and disaster recovery are outsourced using local providers.

Some Potential Confusion in Outsourcing

Small companies are experiencing large cost overruns on application development outsourcing. This could mean that small companies have a lot to learn in order to avoid large overruns.

Specifically, small companies need to know how to properly set up projects and how to negotiate with outsourcing companies. In contrast, large companies have smaller cost overruns on outsourced application development projects.

There is also potential confusion between the terms outsourcing and offshoring. Some companies look at these terms as synonymous. Few small companies are using offshore outsourcing while a large number of big enterprises are offshoring their projects.

The increase in the number of offshore outsourcing companies can not be translated to increased share in the market. Because of bleak economic situations, offshore outsourcing companies are also feeling the impact of the recession. But according to latest studies, the percentage of offshoring projects is still on the rise. This means that offshore outsourcing providers are still making good business.

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