A ground-breaking new study from IBM demonstrates companies engaged in information technology (IT) outsourcing realized improved financial health and performance in comparison to their sector peers.

Drawing from a global database of IT outsourcing agreements across IT services vendors, of which IBM was just one of many, the cross-industry study examined over 56 services engagements over a five-year period. The IBM team utilized a patent pending methodology to measure changes in business performance of diverse companies over a longer-term period—starting from one year prior to outsourcing and up to three years after.

The study's focus was to understand the long-term impact of IT outsourcing on earnings before interest and taxes (EBIT), selling, general & administrative (SG&A) expenses and return on assets (ROA). For all three metrics, the study demonstrated that companies that engaged in IT outsourcing contracts valued at US$50 million or more realized long-term improvements as compared to sector peers.
 
Double-digit improvements
 
How much better did the companies in the study who engaged in IT outsourcing perform when compared to their sector peers?

    * Higher growth in Earnings: Companies experienced an annual growth in earnings that was 11.8 points higher than the sector median.


    * Reductions in expenses: Companies' selling, general and administrative expenses were nearly 9.9 points lower than the sector median.


    * Increased ROA: Return on assets annual growth was 8.6 points higher than the sector median—a swing of 16.1 points (prior to outsourcing, the companies' ROA growth rate was 7.5 points lower than the sector median)!

 
Outsourcing IT: A business strategy that can boost performance
 
Corporate leaders today are required more than ever to deliver tangible progress and bottom-line performance. As this report shows, executives would do well to examine how IT outsourcing can help them reach, and perhaps even exceed, their goals.