Helsinki School of Economics’ Study on IT Governance: Business Management Expects Flexibility, IT Management Seeks Cost Efficiency

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Helsinki, 29 September, 2005 — Helsinki School of Economics’ Study on IT Governance: Business Management Expects Flexibility, IT Management Seeks Cost Efficiency

Application outsourcing has become a hot topic in discussing IT governance. Business management expects IT to be now able to generate new business opportunities. Simultaneously, IT management is too absorbed in thinking about cost savings, impairing business-revitalising application development.

Application development projects should be seen as an integral part of business development and also measured as such. There’s a lot of talk about measuring benefits, but is it actually done, no. The majority of the interviewed business directors, over 74 per cent, reported they follow application projects closely. However, only less than 49 per cent of companies use proper benefit metrics in monitoring them.

This information was gathered from a recent study, Application Services as Part of IT Governance: Possibilities and Challenges of Outsourcing Application Services. It analyses the perceptions of business and IT management of the largest companies in Finland in terms of using application services in IT management functions. The survey, conducted by means of phone interviews in May-August, looked into the differences of opinions between business management and IT management, and their take on application services. The responses were given by a total of 118 persons of 78 different companies. HSE conducted the study on assignment by Fujitsu Services Oy.

Customer who buys application services acquires all business-critical computer software as a service from a service provider. Cost factors turned out to be clearly the single most important reason to outsource or not outsource application services. IT management placed stronger emphasis on cost factors than business management.

Both business and IT management respondents considered cost efficiency as the most significant benefit to be gained from outsourcing application services. Flexibility was also important to business management, but only a fifth of the respondents reported that their company has sufficient flexibility to adapt IT costs to a lower level.

As for factors that hinder outsourcing, opinions differed considerably. IT management underlined both the lack of cost efficiency and the need to retain critical functions within the company far more often than business directors. They, for their part, mentioned the company’s internal inflexibility as the biggest impediment to outsourcing application services as often as the lack of cost efficiency.

For further information, please contact:
Researcher Risto Rajala, HSE, tel. +358 9 431 383 24
Sales Director Timo Annala, Fujitsu, tel. +358 40 500 0637