Outsourcing still way to save millions, says Forrester

IT organisations that outsource infrastructure management and application services can expect to save 12% to 17% annually on average, according to a new Forrester Research report

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IT organisations that outsource infrastructure management and application services can expect to save 12% to 17% annually on average, according to a new Forrester Research report

Forrester looked at US companies, which spent close to $150 billion (£75m) for all IT services and outsourcing in 2006, and concluded that they could reap more rewards by crafting better contracts.

Motivated by previous survey results showing that about 70 percent of 615 technology decision-makers are hoping to reduce their budget spend on IT services, Forrester teamed with IT outsourcing advisory firm TPI to calculate potential savings.

TPI provided data from more then 50 IT outsourcing transactions between 2003 and 2006, and all of the deals used in Forrester's study included infrastructure management services, with 22 of the contracts also featuring application services.

Forrester says companies seeking large outsourcing engagements should target the "sweet spot deal," which runs for around seven years in duration and has a total contract value of between £100m and £500m, with between £25m and £60m in annual spend.

Forrester's savings calculations -- determined by comparing the projected internal costs without outsourcing to the total planned costs with outsourcing -- show that companies landing such sweet spot deals could save 17% at the high end and 12% in more conservative deals.

"The few dozen TPI clients analysed here have unlocked at least $3.3bn (£1/65bn) of total commercial value," Forrester reports.

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