Gartner Survey Shows Most IT Outsourcing Deals Continue to be Focused on Cost

Keys to Successful Outsourcing Deals to be Discussed at Upcoming Gartner Outsourcing Summit, April 3-5 in Orlando

STAMFORD, Conn., March 14, 2006 – Strategic IT outsourcing can be an integral part of an organization’s long-term business success, but a new survey by Gartner, Inc., shows that the majority of organizations worldwide are still focused on tactical IT outsourcing to achieve short-term, cost-focused objectives.

During the second half of 2005, Gartner conducted a global IT outsourcing survey in North America, Western Europe and Asia/Pacific in which a total respondent base of 945 individuals discussed outsourcing practices, issues and challenges. IT outsourcing consists of data center, desktop network, and enterprise applications outsourcing.

According to the survey, “controlling/reducing operating costs or improving efficiencies” was identified by more than half of the respondents in each region as the primary value they expected to receive from IT outsourcing. Efficiency deals are focused on cost control and, over time, cost reduction with the goal of maintaining consistency in service delivery. The survey found that fewer organizations focused their IT outsourcing initiatives on accelerating or improving business outcomes, called enhancement deals, or significantly improving or altering their competitiveness, referred to as transformation deals.

“One of the great clashes in the market today is driven by the dominant use of outsourcing to cut costs along with requirements for customized services,” said Allie Young, research vice president for Gartner’s Sourcing research group. “Only by foregoing customization and moving to standardized services can the market effectively and reliably deliver the cost efficiency goals.”

According to the survey, “achieve cost take-out” was identified as the foremost driver of IT outsourcing, with large organizations more frequently identifying this driver than smaller organizations. Following cost take-out, respondents equally rated “achieve speed, agility, flexibility” and “gain access to technical expertise and skills” as leading drivers.

Overall, variations existed by vertical market and by geography. Financial services, government, process manufacturing, services, transportation and wholesale/retail organizations all ranked cost take-out as the top driver of IT outsourcing. North American respondents identified “improve IT service to end users” as their leading driver. The top two inhibitors to IT outsourcing focused on data security or privacy issues and concerns around the potentially high costs of outsourcing.

“Companies have a growing concern about losing control of their intellectual capital and the business knowledge of key employees whose jobs or roles may be threatened by outsourcing, particularly when downsizing occurs,” Ms. Young said. “As part of a sourcing strategy, organizations must carefully examine the goals they wish to reach from outsourcing, but equally their concerns. This exercise not only will help in developing a sourcing strategy, sourcing maxims and prioritization of goals, but will educate various constituents in the organization about realistic outcomes and possible false assumptions or misperceptions that it holds about outsourcing.”

Additional findings from this survey, as well as practical advice on outsourcing will be presented at the Gartner Outsourcing Summit, taking place April 3-5 in Orlando, Florida. The Gartner Outsourcing Summit is the only event designed to provide a comprehensive view of the entire outsourcing arena that allows leaders from both business and IT groups to come together; and offers a holistic understanding of all the options, risks and opportunities available. The Summit provides unbiased, road-tested advice and best practices necessary for setting outsourcing strategies and objectives, evaluating and selecting the right services providers, managing relationships with external partners and delivering profitable outcomes. Many of the 50-plus content sessions will feature case studies and panel discussions presented by end users and industry professionals. For complete event details please visit the Gartner Outsourcing Summit Web site at www.gartner.com/us/outsourcing.

Members of the media can register by contacting Christy Pettey at christy.pettey@gartner.com.

About Gartner:

Gartner, Inc. (NYSE: IT) delivers the technology-related insight necessary for its clients to make the right decisions, every day. Gartner serves 10,000 organizations, including chief information officers and other senior IT executives in corporations and government agencies, as well as technology companies and the investment community. The Company consists of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 3,700 associates, including 1,200 research analysts and consultants in 75 countries worldwide. For more information, visit http://www.gartner.com.