IT outsourcing yet to pick up in Philippines

Although there is a huge potential for strategic IT outsourcing in this country, it may take some time before this potential is fully harnessed by local companies.

This was the assessment of IT outsourcing provider Soluziona Philippines, who, in a media briefing held last week, stated that outsourcing “myths” have slowed down the adoption of strategic IT outsourcing by many local firms.

Soluziona Strategic Outsourcing practice leader Charito Baretto lamented that many organizations are misguided by the notion that IT outsourcing equates to loss of control over – as well as loss of flexibility with – a company’s IT processes. Worse, some of these companies think that IT outsourcing bespeaks of “inefficiency” in the interim IT department; that it abolishes the role of the chief information officer; or that it will never deliver the expected cost-saving benefits.

“These ‘myths’ have long served as the roadblocks to the success of local IT outsourcing,” Baretto said. “Unless organizations break free from these disillusions, adoption is likely to remain slow.”

“Awareness is the key. As soon as (these companies) adopt the right mindset, it won’t take too long (for them) to leverage strategic IT outsourcing to their advantage,” she stressed.

Baretto urged local firms to focus on the benefits of having a third-party provider manage their IT operations. Apart from improved company focus, access to global expertise and alliances, and reduced operating costs, companies engaged in IT outsourcing gain access to resources that are not available internally, she said.

“Outsourcing allows firms to take advantage of the skills and experiences of service providers who make considerable investments in technology, methodologies and training of their IT human resources. Additionally, they acquire experience through numerous projects with other clients facing similar challenges,” she noted.

Likewise, by allowing outsourcing specialists to assume operations of non-core functions, companies can focus on their core competencies in addressing the needs of their customers.

Baretto said outsourcing provides companies the means to acquire resources and capabilities that are not available internally. It offers an alternative to developing a capability internally or acquiring resources outright. By taking advantage of the provider’s lower cost structures, outsourcing reduces a company’s operating costs and increases its competitive advantage.

“Transferring full accountability of the IT (department) can also make up for corporate shortages in IT skills and can eliminate productivity delays resulting from an in-house learning curve,” she added.

Worldwide research firm International Data Corporation (IDC) has predicted that the global adoption of IT outsourcing will pick up by 2005. Soluziona believes local firms will start testing the waters of IT outsourcing within the same timeframe.

Although Baretto did not disclose actual figures, she expects more local companies to outsource their IT processes to third-party providers this year than in 2002. “We foresee the local trend to be that of a ‘phased implementation.’

Local organizations are likely to start from a small implementation and move on to the outsourcing of bigger, more complex operational processes,” she said.

Soluziona currently services the IT requirements of the Manila Electric Company (Meralco) and some government offices. The company is also targeting the banking, manufacturing, and telecommunications industries for their IT outsourcing needs.

Its IT outsourcing operations include applications development and maintenance, data centre management, data network services, help desk, and end-user support services. It also offers software management services, business intelligence solutions, management consulting and process management, as well as collaboration and knowledge technologies.