Midsize Firms Get More Value from Outsourcing

By Allan Alter Print this article Print

Mid-Market Report: New research from CIO Insight reveals that smaller companies are more satisfied with their outsourcing deals than larger firms.

While most small and midsize businesses use outsourcers, they are more finicky about how they use them, compared with larger organizations. Except for application development, hosting and integration, fewer than one in four mid-market companies outsource major IT activities. But perhaps mid-market CIOs should use outsourcers more often—their peers at companies with revenues of less than $500 million seem rather happy with the results. Not only are they more satisfied than IT executives at larger companies, but they give domestic and offshore vendors better grades for quality, ROI and solving business problems. In short, outsourcing is more manageable at SMBs—and more likely to be successful.

Finding 1
Mid-market companies have embraced outsourcing. Seventy-nine percent of companies with revenues of less than $500 million outsource at least one IT activity. That’s almost as high a percentage as at larger companies. However, small and midsize businesses spend less of their IT budgets on outsourcing than larger firms. Mid-market companies have definitely embraced outsourcing, but they are not eager to increase the amount they spend on outsourcing, nor are they likely to use offshore vendors, because they may not be as motivated as large companies to use outsourcing to reduce costs.

Finding 2
Mid-market companies are generally more satisfied with their outsourcing experiences and vendors than are big firms. Like larger companies, small and midsize businesses most often outsource specific projectrelated work, such as application development and systems integration. Few turn to outsourcers to manage their networks, help desks, data centers or security. The biggest difference is in satisfaction: Smaller companies appear to get less attention from outsourcing vendors than larger customers do, and most SMBs don’t give vendors good marks for responsiveness. Still, mid-market companies have relatively simpler, smaller outsourcing needs that are easier to manage, so vendors tend to do a good job. View the Slideshow.

This article was originally published on 2007-03-07
Executive Editor

Allan Alter has been a specialist on information technology management, strategy and leadership for many years. Most recently, he was editor-in-chief and the director of new content development for the MIT Sloan Management Review. He has been a columnist and department editor at Computerworld, where he won three awards from the American Society of Business Press Editors. Previously he was a special projects editor, senior editor and senior writer for CIO magazine. Earlier, Alter was an associate editor for Mass High Tech. He has edited two books: The Squandered Computer: Evaluating the Business Alignment of Business Technologies and Redesigning the Firm.

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