September 9, 2012 – IT spending on outsourcing is rising significantly this year, according to Computer Economics’ “IT Outsourcing Statistics 2012/2013” report.

The firm says the rise is especially significant because IT capital and operational budgets are also rising, if only slightly, from the recessionary retrenchment.

Last year, the annual report showed no growth from 2010 to 2011, which is Computer Economics attributed to cost-cutting measures.

However, 2012 is showing growth. “While outsourcing is frequently touted as a way to reduce costs, the recession stimulated as much cost-cutting in outsourcing as anywhere else,” the report states. “The pendulum is now swinging in the other direction and organizations are expanding their outsourcing budgets as they engage in renewed investment in application development, more flexible infrastructure, and cloud-based applications.”

The study, which includes information from 137 U.S. and Canadian IT organizations in a number of industries—insurance included—indicates that as IT organizations increase spending, they turn to service providers for assistance because they may lack internal resources or are still reluctant to hire permanent staff. “But the upswing is also part of a longer-term trend that was interrupted by the recession,” the report states. “IT organizations see opportunities to become more competitive via outsourcing, but that requires significant investment in technologies that will enable them to become leaner, more flexible, and ultimately more prepared for growth-oriented innovation.

Other key findings from the IT Outsourcing Statistics 2012/2013 study include:

• The use of software-as-a-service (SaaS) continues to gain strength, making application hosting the fastest-growing outsourcing service in the study.

•Another form of outsourcing with a positive trend line is data center outsourcing. Advancements in data center technology are creating economies of scale for data center operators as well as SaaS solution providers.

•The two most widely outsourced functions are Web/e-commerce systems and application development. The outsourcing of application development surged over the past year, but the rebound is mostly cyclical. The trend indicates slower growth is ahead.

• The IT functions with the greatest potential for successfully reducing costs through outsourcing are help desk and desktop support. Meanwhile, the functions with the greatest potential for improving service are desktop support and IT security.

This story originally appeared at Insurance Networking News.

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