It Outsourcing Slow To Take Off Locally

[george]

IT outsourcing slow to take off locally

BANGKOK: -- Many companies around the world outsource their IT work, but with local firms reluctant to allow others to tap into their information, the trend has yet to take off in Thailand.

But Mike Switek, chief executive of IT One, an information technology outsourcing specialist, thinks it is only a matter of time before Thai companies see the value in contracting out their hi-tech work. As companies focus more on their core competencies, IT outsourcing will sooner or later become widespread, even in the Kingdom, he said.

“We expect one to two major deals to help it take off here,” he said.

Companies around the world are increasingly outsourcing a variety of tasks, from manufacturing and human resources, to legal work and accounting, as well as information technology.

Recognising this, the Kingdom’s largest industrial conglomerate, the Siam Cement Group, three years ago spun off 220 of its IT employees to form IT One, a joint venture with Accenture, a global IT and management consulting firm.

The new company established a business model for both firms to jointly concentrate on the areas in which they excel.

Siam Cement created the company to leverage its IT capabilities and make its services available to all of its subsidiaries and add value to them. The company can implement, for example, supply chain and CRM (customer relationship management) software projects, Switek said.

The phones at IT One are ringing and potential clients are regularly visiting the firm’s offices, evidence, said Switek, that more Thai companies were interested in giving IT outsourcing a whirl.

“This year alone we’ve added four new clients,” said Jinnarat Thiamariya, IT One’s business solutions director.

Still, the company is working hard to sell Thai companies on the real value of IT outsourcing and that reducing costs should not necessarily be the deciding factor.

“It might not be worthwhile, if you outsource IT just for cost-cutting because at a typical organisation, IT accounts for only 1 to 2 per cent of the total budget,” he said.

Also, many companies are reluctant to reveal business information to IT vendors.

“The biggest obstacle is how to [make companies] trust the vendor to run their IT,” said Kitti Pullket, chief operations officer for IT One.

After concentrating on providing services to more than 110 companies in the Siam Cement Group during the past three years, IT One has been taking on more outside customers.

The company now has seven or eight clients outside the group. Within five years, the firm expects to increase revenues from non-Siam Cement companies to 50 per cent from less than 10 per cent currently, he said.

Switek made the prediction despite the group extending the exclusive contract for IT One to run its IT systems until May 2008.

IT One expects its revenues to grow 10 per cent this year from Bt500 million in 2003. The company employs 300 people.

--The Nation 2004-05-24