Nearly all governments are outsourcing - but not for the obvious reason

Nearly 90 per cent of government managers worldwide say they outsource activities that are "important or absolutely critical" in supporting services for citizens, according to new study released on Thursday by consulting firm Accenture.

Among the activities and services most outsourced by the government are information technology applications and infrastructure support; finance and accounting; human resources and supply chain operations; and staff training and education.

Tech-related outsourcing - a service that Accenture provides - involves businesses and governments contracting with IT companies for application development and technology support, leaving the business or agency to focus on its core products and services.

The results of the study are based on surveys and interviews with more than 150 executives in 23 governments in North America, Asia, Europe and South America.

The survey suggests a favourable business environment for IT outsourcing companies such as CSC, EDS, HP and IBM. As it stands, IT outsourcing has been one of the few strong segments in an otherwise struggling technology sector.

With the global economic recovery teetering from persistent fears of terrorist attacks and now from the outbreak of severe acute respiratory syndrome (SARS), businesses yet have to pick up their technology spending for computers, software and other technology.

Government spending, however, has provided a lifeline - especially in the US. Since the terrorist attacks of 11 September 2001, for example, the government sector has picked up the pace of IT spending related to homeland security.

The results of the new study indicate that outsourcing may not actually result in cost reductions.

The Accenture survey found that government managers who said they outsourced to gain access to technology or to make their operations more efficient were more satisfied with their decision than those who outsourced primarily to cut costs.

For instance, about 70 per cent of managers who said they outsourced to gain access to new technology, centralise or standardise operations, or simply tap specialised expertise indicated that their objectives were mostly or fully met. By contrast, the study found that 50 per cent of managers who outsourced to reduce costs and that 24 per cent of those who did so to increase revenue said their objectives were mostly or fully met.

Sandeep Junnarkar writes for CNET News.com.