Data center computing and operations and Application Development or Maintenance (ADM) has the highest reported satisfaction levels, according to a study conducted by the Aberdeen Group. This suggests the high level of competition among service providers in these two areas, both in outsourced and offshored locations.

The rise of offshore providers in the ADM space has forced the U.S.-based outsourcing vendors to compete for customers not just on the basis of price, but on quality as well. Many India-based service providers have increased their levels of software-process maturity to a point at which some providers have achieved the highest rating — Level 5 — of the Software Engineering Institute’s Capability Maturity Model (CMM). Because of high quality and reduced costs in these two areas, many of the respondents were relatively satisfied with their outsourced contracts.

Moreover most companies report adequate results from outsourcing across eight different IT activities: ADM, data center computing and operations, end-user computing (e.g., PCs and help desk), business continuity, disaster recovery, IT security, voice-network management and data-network management.

The study further points out that minimizing costs are still the top reason for IT companies to outsource their work as 63% of respondents cite cost reductions as their top reason to outsource followed by reasoning that outsourced services are not their core competency (56%).

The two major challenges in the outsourcing contract faced by the companies are: Managing the outsourcing provider and managing outsourcing expectations. Most companies agree that adding more management muscle may solve the problems.