Recession-proof outsourcing?
Technology companies face being hit by the "credit crunch" and a downturn in business in 2009, according to leading analyst Richard Holway in an interview with Computer Weekly magazine. He predicted that revenue across the IT sector will decline in 2009, a recession for the industry of up to 2% because technology companies are dependent on discretionary spending.
This means trouble for the industry, he reckoned. "Their outlook is looking much less healthy than they were a year ago, even six months ago,” he said. "I would suggest that the real problem with technology is not in the first six months of this year, maybe it is not going to come in even the second half of this year, but I really do believe that 2009 could be the year when all of this finally catches up with the technology sector."
But not every sector is being squeezed. Connect, the IT support company for SMEs, has revealed new figures that show IT outsourcing in the recruitment sector is gathering pace as a direct result of the credit crunch.
“Since the start of the year, we have seen a 75% increase in the number of enquiries for IT support, with companies in sectors most affected by the credit crunch – notably recruitment companies – leading the way.” said Mark MacGregor, Chief Executive of Connect. “The increase in enquiries is particularly marked in mid-sized companies with 50-500 employees, where the cost of their own internal IT department is seen as an overhead they can reduce or eliminate speedily.”
MacGregor believes that the main driver for this surge in interest is a desire to reduce headcount, but that the greater flexibility available from outsourcing is also an important factor. “Outsourcing is an obvious way to save money quickly - but many FDs are also interested in finding ways to increase or reduce IT support to match the growth or reduction in their own employee numbers,” he said. “For some clients who want to retain some capacity inhouse, we have designed specific packages that allow us to take over, for example, server or third line support, leaving the customer to continue with the simple fixes.
“We have also seen increased interest in any service where recruitment companies pay a monthly fee - rather than having incur to large upfront capital expenditure. Connect’s online backup service is a classic example – instead of having to find large sums to pay for mirrored servers, firms can back up all their data for a fixed monthly fee, starting at just £83 per month.”
But he added that the old rules about outsourcing had to be observed. “Outsourcing can be an attractive option but companies need to be careful,” he said. “It is an old truism that you should not outsource a problem and expect it to be magically solved. It is vital to spend the time at the start of any contract getting your IT strategy and processes right – only then can you have any confidence in successfully transferring your IT function to a third party.”
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