Cloud-based services are failing to capture the popular imagination of UK businesses according to a global KPMG study of almost 2,100 contracts covering deals worth £7.8 billion.
The study revealed that 71 percent of UK organisations are spending a mere 10 percent, or less, of their IT budget on Cloud services.
Asked why they are reticent about employing Cloud services, the top 3 reasons cited by UK C-suite respondents centred around data location, security and privacy risks (26 percent), concerns over regulation and compliance (16 percent) and cynicism around the ease with which Cloud services can integrate with legacy IT systems (15 percent).
The 8th annual ‘Service Provider and Performance Satisfaction’ study also revealed that organisations are increasing the level of IT services they outsource to improve service delivery, with many investing budgets saved over the past few years on HR, sales and finance support.
The favoured destinations for ‘tried and tested’ IT support outsourcing remains India (51 percent), Poland (8 percent) and South Africa (8 percent).
Jason Sahota, director in KPMG’s Shared Services and Outsourcing Advisory team, commented: "Despite widespread acceptance that Cloud services offer access to the latest technologies, and make IT more accessible, adoption remains relatively sluggish
"While concern about the security risks surrounding new technology is understandable it may also be disproportionate, as Cloud options are just as safe as other outsourcing solutions.
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"Of course, investors and stakeholders will welcome caution on the part of the buyers, but they also want to see innovation, meaning that UK plc will need to find the right balance to remain competitive."
Respondents were asked about their IT outsourcing plans for the next two to three years, with just 43 percent saying that they plan to increase spending. This figure contrasts with 77 percent, this time last year, highlighting the nervousness to commit to long-term investments.
However, where budget has been set aside for outsourcing, this year’s survey shows that the search for quality improvement (20 percent), access to skills (16 percent) and a desire to reduce the time it takes to ‘get things to market’ (6 percent) are driving the rationale behind IT outsourcing decisions.
Sahota concludes: "As IT forms an inseparable part of the wider business strategy in many organisations, technology decisions are now rarely left to the CIO alone.
"It means that, with the potential for conflict over the choices being made, organisations should dedicate a greater level of investment towards governance than they may have in the past.
"If they fail to do so as they move towards more complex delivery models, poor governance can impact their ability to provide quality services, increasing risks around cost, service quality and delivery."
