Special Report: Outsourcing's Ups And Downs

Two years ago, Dynegy Inc. appeared destined to follow its larger hometown rival Enron Corp. into scandal and bankruptcy. The Securities and Exchange Commission was suing the Houston energy company for questionable accounting methods, debt was mounting, and the entire energy industry faced punishing scrutiny in the wake of Enron's blowup. Dynegy, with 2003 revenue of $5.8 billion, has since resolved most of its legal troubles, and it has cut debt by about two-thirds.

Dynegy's decision last year to outsource the bulk of its IT operations to Accenture is a big contributor to the turnaround, says Steve Moffitt, Dynegy's CIO and a senior VP. "We were stuck with a technology infrastructure built to support a $40 billion company, and that's not where Dynegy was anymore," he says. Accenture has taken over systems management, help desk, application development, and most of Dynegy's other major IT operations. The result: The company has cut its IT costs by up to 30%. What's more, by outsourcing, Dynegy is better positioned to integrate operations from a recent $1 billion acquisition of Exelon Corp.'s power-generation plants. "We're shifting to a global model, and Accenture has the means to support that," Moffitt says.

Dynegy's experience indicates why the outsourcing business continues to enjoy steady growth. Worldwide spending on IT services increased 6.4% in 2003 to $570 billion, according to research firm Gartner. Despite that growth, IT executives aren't overly satisfied with their outsourcing partners. A recent InformationWeek Research survey of more than 300 business-technology professionals shows an average customer satisfaction rating of 6.4 on a scale of 1 to 10, where 1 is "not at all satisfied" and 10 is "extremely satisfied." That's down from 7.1 in InformationWeek's last survey of outsourcing buyers two years ago. And nearly 30% say their outsourcer hasn't met their expectations. The survey also asked respondents what they seek in outsourcing providers, rating them in 10 categories, including reliability, reputation, cost/value, and vertical-industry knowledge. (Find out more about the survey methodology)