Tuesday, March 18, 2008

IT Outsourcing 50% More Expensive Than In-House

A state report says outsourcing Information Technology projects is 50% more expensive than doing it in-house.

This is from a 2006 report on civil service IT hiring practices by the California Research Bureau:

"Outsourcing creates considerable additional expense. Departmental estimates vary, but most calculate that outside contractors cost 50 percent more than doing the work in- house. This figure does not include the overhead involved with hiring contract employees working on-site. The average rate per hour for an IT contract worker is approximately $65, while special-skills contractors can demand $150 to $200 or more per hour. The comparable rate for a state IT employee ranges from $34 to $43 an hour including benefits.
Contracting out can require state agencies to rely on contractors over the long term for systems maintenance if knowledge transfer is not provided for in the contract, and this contributes to inflated costs on future projects."

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