IT Services, Clutch Report

IT Services for the Enterprise: Sourcing Decisions

May 3, 2017

by Grayson Kemper

Content & Editorial Manager, Clutch

As digital, mobile, and information technologies define increasingly crucial roles in the enterprise, IT decision-makers for these companies must make decisions on a daily basis that impact their entire organization. Given the current premium placed on IT services, it is imperative that enterprises make fully-informed decisions regarding how to prioritize investments and address service needs in the IT space. Clutch’s newest research explores these topics in detail.

How do enterprises approach IT services needs in the digital age? Which IT services do they consider the most important? Finally, who do they depend on to address their needs?

Clutch surveyed 582 US-based enterprise IT decision-makers (those that work at companies with over 500 employees) in order to examine trends in IT priorities and procurement strategy among enterprises.

When considering procurement options, enterprises indicate that they favor resources for IT services more conducive to their input, like in-house resources or external providers with strong communication capabilities. However, Clutch found a variety of external factors that shape how enterprises approach their IT services needs and strategy.

Our Findings

  • Half of the enterprises surveyed plan to increase the amount of IT services handled in-house in 2017.
  • Three-fourths (75%) currently employ third-party service providers for IT services.
  • Enterprises most commonly employ third-party providers for IT services that concern data security and management—which also happen to be the central tenets of enterprise mobility strategies.
  • Enterprises cite better quality, communication, and security to explin their trend of favoring domestic providers over offshoring for IT services.

Enterprises Plan to Grow Internal IT Resources in 2017

Enterprises plan to expand their in-house IT resources this year. Our data indicates that half (50%) will bring more IT services in-house in 2017.

Enterprises trending toward in-house for IT services in 2017

Richard Rabins, the CEO of app development software firm Alpha Software, identifies two factors driving this trend: the tech-savvy of incoming workforce generations, and the decrease in complexity of actual information technology.

“We’re entering into a new phase of workers who have a reasonable amount of technical savviness. That’s the first thing that’s causing trends that more work will be done in-house," Rabins said. "At the IT level, [in-house personnel] don’t have to be superstar developers--you can give them one of these low code products and make them productive."

The influx of these less experienced yet technically adept young developers, along with tools and resources better suited for beginners, provide dynamic resources for enterprises to employ for addressing IT needs.

Another factor enticing enterprises to bolster their in-house IT resources involves the amount of control in-house resources allow them to maintain over IT projects. This factor especially comes into play in the case of security-intensive projects and high-priority investments, like those pertaining to mobility, according to Mike Hughes of Outsystems, a low-code development platform.

“If you think of types of more specialized work like mobility, I think organizations are going to try to do it themselves and have that control,” said Hughes.

Thus, the combination of minimal risk and maximum control that in-house resources can provide entice enterprises to build out their internal IT assets.

Most Enterprises Use IT Service Providers

Third-party service providers are a critical resource for enterprise IT. 75% of enterprises use third-party vendors for IT services.

75% of enterprises use third-party providers for IT services

Two major reasons enterprises partner with external providers for IT include their objective perspectives and industry-specific skills, which internal teams may be incapable of replicating. For example, third-party vendors can provide objective security audits for an enterprise, according to Magnus Jern, Chief Innovation Officer for DMI, an end-to-end mobility firm based in Bethesda, Maryland.

“You want external people especially in security,” Jern said. “You can’t really audit yourself. In addition, third-party providers bring IT experience from previous projects in the field, which they can use and reference to help better address enterprise IT service needs.”

Jern also notes that because skills in IT are at such a premium in the enterprise, outsourcing some IT work may be a necessity for some companies. Thus, for enterprises, third-party vendors still retain unique capabilities in the IT space which provide distinct advantages for addressing IT needs.

Mobility Concerns Define Major IT Services Focus

Given the number of enterprises that rely on third-party providers as a resource to procure IT services, the span of services that enterprises outsource varies significantly.

Despite their variety, the most commonly outsourced services—data security (47%), integrating cloud technologies (43%), and mobile support (40%)— all directly relate to enterprise mobility concerns.

IT Services Outsourced

The finding that ‘data security’ and ‘cloud integration’ are the most commonly outsourced IT services corresponds with data from recent research by Clutch and DMI which finds data security and cloud integration as central components of enterprise mobility strategies. Enterprises identify data security as the primary challenge of investing in mobility, while cloud integration is both the most common mobility investment and the area of mobility expected to experience the largest increase in investment over the next year.

The data from this survey confirms that enterprises use service providers in large part to address challenges and support growth in these high-priority, mobility-focused areas. Magnus Jern validates the importance of mobility within the enterprise IT complex.

“Mobility is central to enterprise IT. One of the reasons they have to outsource [mobility work] is because these are skills that are in high demand.”

However, the fact that enterprises frequently outsource crucial mobility services also contrasts with the sentiment expressed earlier by Mike Hughes, who identified control over high-priority IT investments, like mobility services, as motivation for enterprises to expand their in-house IT resources. However, as Jern suggests here, service providers often possess technical talent suited for these premium services, such as data security and cloud integration, that some enterprises simply do not have access to in-house.

Most Enterprises Partner With a Mix of Domestic and Global Providers

When approaching procurement of IT services from external partners, a factor enterprises must consider involves where the providers under consideration are based; specifically, whether they are domestic (US-based) or offshore.

Enterprises vary in their preferences between domestic and offshore firms, and most commonly choose to employ a combination of both to address IT service needs. 37% use an equal mix of both, while an additional 39% use a combination weighted toward either domestic or offshore firms.

Most Enterprises Partner With Both Domestic and Offshore Providers

Overall, half (50%) of enterprises employ either ‘mostly’ or ‘only’ domestic firms for IT services. However, the amount using both seems to indicate that enterprises find merit with both types of provider, and look to a balance of both to take full advantage of their benefits.

A Trend Toward Domestic Resources

Along with more enterprises currently working with domestic firms rather than offshoring, 78% say they are trending toward partnering with more domestic firms in 2017.

78% of enterprises are trending toward domestic providers for IT services

One explanation for the preference for domestic firms, according to Adam Fingerman, CEO of ArcTouch, a San Francisco-based app development company, involves the service quality benefits of domestic firms compared to challenges associated with partnering with offshore providers, such as communication and security.

Benefits of Partnering With a Domestic IT Service Provider  

Enterprises list quality of service (36%) and communication (23%) as the primary benefits of partnering with domestic firms, and communication (26%) and security (22%) as the primary challenges of partnering with offshore providers.

Biggest Challenges of Partnering With an Offshore IT Service Provider

Magnus Jern emphasizes communication as a particularly useful advantage of partnering with a domestic firm for IT service work that requires on-site assistance, as is the case with many security-intensive projects, “Having access to people – the more time the teams can spend with the customer and understanding their needs, the better it is.”

Varun Dogra, CTO for DMI’s Government Practice, reinforces Jern’s statement, and draws a direct connection between a lack of communication between partners for an IT project and decreased quality of work.

“A breakdown in communication between your internal team and your IT service provider results in elongated projects and a drop in delivery quality,” Dogra said.

Given these advantages of quality assurance that seem to favor domestic firms, enterprises increasingly choose domestic providers to address critical IT needs.

Offshore Providers “Not Going Away”

While the current trend among enterprises favors domestic firms as partners for an IT services need, offshoring remains a viable, and valuable, resource for IT services. In fact, 36% of enterprises consider ‘value’ the primary benefit of partnering with an offshore IT provider.

Benefits of Partnering with an Offshore Service Provider

The value enterprises experience through offshoring seemingly contrasts with the experience of partnering with domestic vendors, the cost of which over one-third of enterprises (34%) identify as the primary challenge.

Main Challenges Partnering with Domestic IT Service Providers

Given this distinction, global providers will remain a common resource for procuring IT services, according to Richard Rabins.

“It’s not like offshoring is going away,” Rabins said. 

Rabins’ position finds evidence in our research. As mentioned previously, 37% of enterprises use a mix of the offshore and domestic IT providers. Of that group, less than one-fourth (23%) exclusively use domestic IT service providers for IT services (see “Enterprises Partner With Both Domestic and Offshore Providers” graph above). Overall, only 22% of enterprises are unlikely to use offshore IT vendors in the future.

Likelihood of Enterprises to Hire Offshore Vendors for IT Services in the Future

Varun Dogra, for his part, credits enterprises for finding alternative applications for offshore providers, particularly in arrangements where they employ a mix of both domestic and offshore resources to address IT needs. For example, offshore firms may act as low-cost resources for auxiliary IT work, services which largely circumvent security and communication concerns.

“When it comes to a base level of IT services, some of them can be done more economically in other parts of the world,” said Dogra.

Another method enterprises use to maximize the value of global IT resources involves leveraging offset work cycles with teams based in different time zones. If planned correctly, this arrangement can result in multiple teams working on a particular IT project for a full 24-hour cycle, which has the obvious advantage of slashing time resources dedicated to an IT service need.

Recap of Research and Takeaways

From our survey of 582 enterprise decision-makers, in addition to insight from IT experts, it is clear that IT services are valued at a premium in the enterprise, particularly those concerning mobility and data management. Given the importance of IT, the issue of who to trust to address IT services needs now qualifies as a major concern and strategic initiative among enterprise decision-makers. Below, we provide key takeaways that capture IT sourcing trends and priorities in the enterprise.

Key Takeaways

First, in 2017, enterprises plan to expand their in-house IT resources and increase the amount of IT services they procure from domestic providers.

However, 75% of enterprises also use third-party providers, which indicates that IT outsourcing remains a viable resource for enterprise IT needs.

Finally, the IT services needs enterprises most commonly outsource are all distinctly associated with mobility-based projects and investments, signifying that mobility occupies a central facet of enterprise IT operations.

About the Author

Grayson Kemper_Headshot

Grayson Kemper is a content developer and marketer at Clutch, a B2B research firm in the heart of Washington, DC. He focuses on enterprise, telecom, and SEO segments. Reach out with questions, comments, or concerns at [email protected]

About The Survey

Clutch surveyed 582 US-based enterprises regarding how enterprises approach IT services and mobility strategy. Enterprises are defined in this survey as an organization with over 500 employees.

68% of enterprises surveyed have at least 1,000 employees. 70% of respondents hold the position of senior manager or above.

The results of this survey were collected throughout October and November of 2016.

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