CIOs Must Now Focus on the Benefits of Application Outsourcing
Applications represent 40-60% of most IT budgets but have yet to be significantly outsourced A London Business School report commissioned by Fujitsu sets out recommendations for making application outsourcing successful.
Fujitsu has today announced the publication of a research study entitled “Making Application Outsourcing Successful: Business, IT and Competitive Advantage.” The report*, commissioned by Fujitsu and conducted by MBA students at London Business School, provides a set of clear recommendations for how CIOs should address the complicated issue of application outsourcing.
Chief among the study’s findings and recommendations are the following:
Competitive advantage drives outsourcing direction and decision-making – you must have a clear understanding about what constitutes ‘competitive advantage’ for your business and be able to segment your applications portfolio accordingly
CIOs who are successful at application outsourcing have a deep business knowledge about their organisations, good board relationships and develop business performance (not just IT or Finance) measures for assessing outcomes
The ability to manage internal stakeholders effectively is essential – in particular CIO/CFO collaboration is vital. The finance department needs to be involved as early as possible in the outsourcing discussion
Strike a balance in the type of applications you outsource – failure to do so will affect the flexibility and agility of the organisation
Enable continuous management – the way application outsourcing is implemented and managed must be continuously reviewed, it can then be adapted as the business landscape changes
The announcement comes at a time when, even coming out of a recession, there is increasing pressure on CIOs to reduce costs. Applications represent 40-60% of most IT budgets but have yet to be significantly outsourced – unlike more traditional forms of infrastructure outsourcing which are widespread and mature.
John Hanley, managing director, Applications Division, Fujitsu UK and Ireland comments, “This is the next big area that CIOs are under pressure to address. The application outsourcing market is not as developed or as advanced as infrastructure outsourcing, but there are huge cost savings which can be realised. However, the costs of getting application outsourcing wrong can be very high – and potentially damaging to an organisation’s ability to do business. Given the complex nature of application outsourcing, we felt there was a clear need to thoroughly investigate how application outsourcing is being carried out.”
Hanley continues, “Whilst these findings are by no means an exhaustive list, the recommendations – and the corresponding report – should provide guidance and insight to CIOs planning to review their approach to application outsourcing.”
Mike Cope, former CIO Virgin Atlantic and a participant in the research concludes, “The CIO knows his/her business best, but IT providers can help. Where the IT supplier can – and should – add value is by providing the tools and support to CIOs to help them make the right decisions around application outsourcing. A good IT service provider should be as motivated as the client to avoid taking on unsuitable applications.”
Last month Fujitsu announced an ambitious 3-year plan to grow its Applications Division, estimating that it will double revenues for the business by 2013. The growth will be overseen by the newly appointed Applications Division managing director, John Hanley, who took up his role in April.
* The report contains in-depth interviews with CIOs from a number of multinational corporations. They were asked focused questions around their experiences of application outsourcing and the factors that they believe lead to a successful outsourcing engagement. Fujitsu’s Applications Division focuses on solving client business issues through the provision of applications management and outsourcing, automating and improving key business processes and delivering complex projects and shared services for major government departments and private corporations.
