Disaster Recovery Tops List of Outsourcing Cost Savings

If you are seeking to curb IT expenses through outsourcing, one safe bet might be to outsource disaster recovery to a service provider.

The recently released Computer Economics IT Outsourcing Statistics 2015/2016 study finds that outsourcing of disaster recovery has the highest potential for successfully lowering costs when compared with 10 other commonly outsourced functions.

As shown in Figure 7 from the study, among IT organizations that outsource disaster recovery, 92% say their costs are the same as or lower than when performing the function in-house. That is not only well ahead of desktop support outsourcing, which always gets high marks in this annual study for cost effectiveness, but also well ahead of disaster recovery’s seventh-place ranking the previous year.

“IT organizations outsource disaster recovery primarily to reduce risk rather than save money, and this is what the study has generally shown in the past,” said John Longwell, vice president of research for Computer Economics, Irvine, Calif. “We think one reason for the change is the maturation of disaster-recovery-as-a-service. Using on-demand cloud infrastructure for disaster recovery can be cost effective if you don’t need to maintain the excess capacity.”

Here are other key findings from our IT Outsourcing Statistics study this year:

• Spending on outsourcing as a percentage of the IT budget remained unchanged at the median year over year, ending a downward trend-line for this metric evident over the pervious three years amid a recovery in IT operational spending. Today spending on outsourcing is rising at a rate that is in step with IT operational budgets as a whole.
   
• While the median percentage of the IT budget that goes to outsourcing remains constant year over year, more organizations are outsourcing IT security work, web/e-commerce systems, and application hosting. On the other hand, fewer organizations are outsourcing help desk, desktop support, and application maintenance functions. Other functions have flat year-over-year trend lines for outsourcing frequency, include data center, application development, database administration, network operations, and disaster recovery outsourcing.
   
• Application hosting is the most frequently outsourced function in the study, and 65% of organizations that outsource this function are planning to increase the amount of work they outsource. This reflects the growing strength of software-as-a-service (SaaS).
   
• Organizations that outsource are favoring help desk and web/e-commerce operations as functions where they are moving the largest percentage of work to outside service providers. On the other hand, application hosting and IT security are functions where IT organizations tend to perform most of the work in-house.
   
• The outsourcing of Web-ecommerce systems, IT security, data center operations, and application hosting have the highest success rates for improving IT service levels over performing the same functions in-house. Outsourcing of application development has the lowest service success rate.
   
• The outsourcing of web/e-commerce systems, desktop support, disaster recovery, and IT security deliver the best value. The outsourcing of these functions can lower cost and, at the same time, improve service levels.

In the full study, we profile outsourcing activity for 11 IT functions: application development, application hosting, application maintenance, data center operations, database administration, desktop support, disaster recovery services, help desk services, IT security, network operations, and web/e-commerce systems.

For each IT function, we measure the frequency and level of outsourcing. We also look at the current plans of IT organizations to increase or decrease the amount of work they outsource. Finally, we examine the customer experience to assess whether organizations are successfully lowering costs or improving service through outsourcing.

This Research Byte is a brief overview of our report on this subject, IT Outsourcing Statistics 2015/2016. The full report is available at no charge for Computer Economics clients, or it may be purchased by non-clients directly from our website (click for pricing).