Data Center Outsourcing Stalls During Downturn

July, 2011

Data center outsourcing is at a relatively low level compared to other forms of outsourcing. While we anticipate this practice will grow in frequency as more organizations embrace cloud computing, the current data suggests that the rate of growth slowed during the downturn.

Figure 1 shows only 24% of organizations practiced data center outsourcing in 2007, as detailed in our study, Data Center Operations Outsourcing Trends and Experience. That number jumped to 30% in 2008, but then remained at about that level during the course of the recession, ending up slightly at 31% this year.

Data RBFig1 - Data Center Outsourcing Stalls During Downturn

The outsourcing of data center operations is potentially a disruptive, risky move that organizations avoided during the period of economic uncertainty. With the recovery in IT spending, IT executives will revisit the question of whether to outsource at least some of their data center operations to service providers.

As data centers become more automated, flexible, and efficient, service providers can leverage expertise and economies of scale to provide attractive alternatives to hosting and managing systems in-house. On the other hand, the data center is the heart of the IT organization and turning over data center operations to a service provider can entail sizable risk as well as inhibit innovation or limit the ability to control cost.

In the full study, we examine data center outsourcing trends to provide IT executives with insight into how broadly and eagerly their peers are undertaking data center outsourcing as a strategy. We also examine the success rates organizations are having when it comes to reducing cost or improving service through outsourcing this critical function. Finally, we report on the extent to which IT organizations are relying on offshore service providers to meet their strategic objectives.

This Research Byte is a brief overview of our report on this subject, Data Center Operations Outsourcing Trends and Experience. 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).