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Last year, IT organizations significantly increased the percentage of their budgets allocated for outsourcing. But this year, not only did they pull back to previous levels; they dropped to the lowest level in five years, according to the new IT Outsourcing Statistics 2018/2019 study from Computer Economics.
This decline has two primary causes. First, favorable economic conditions are allowing IT leaders to invest in selectively bringing outsourced services back in-house. Moreover, with increased use of the cloud, there is simply less need to outsource support of internal IT infrastructure.
As shown in Figure 1 from the full study, the percentage of the total IT budget being spent on outsourcing declined from 11.9% in 2017 to 9.4% in 2018. This represents a major decrease even from previously established norms as organizations have hovered between 10.2% and 10.6% before last year’s temporary increase.
“Company size is actually the biggest factor when it comes to the outsourcing decision,” said David Wagner, vice president of research for Computer Economics, based in Irvine, Calif. “Large companies are actually increasing their outsourcing this year, while small and midsize companies are cutting back. Our research shows that smaller companies are making better use of the cloud and have fewer legacy systems. By shedding some of their infrastructure burden, companies don’t need to reach out to as many service providers for specialized help. Right now, in regards to both the cloud and outsourcing, large companies and smaller companies are on different journeys.”
Here are other key findings from our IT Outsourcing Statistics study this year: