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IT businesses that outsource their company's application services and infrastructure management could save close to 20 per cent a year, according to a new report.

Market analyst group Forrester Research found that companies securing "conservative" outsourcing deals could save 12 per cent in costs, while those that manage to hit a "sweet spot deal" could save as much as 17 per cent.

Partnering with IT specialist outsourcing advice firm TPI, Forrester calculated these figures based on more than 50 IT outsourcing deals implemented between 2003 and 2006.

"The few dozen TPI clients analysed here have unlocked at least $3.3 billion (£1.65 billion) of total commercial value," the report concluded.

Considered the ideal outsourcing contract, the "sweet spot deal" should last for about seven years with a total contract value of between £100 million and £500 million, with an annual spend in the region of £25-60 million.

In a recent survey, Forrester found that as many as 70 per cent of IT managers are actively looking for ways to reduce the costs of their services.

In a recent survey of SMEs for Connect, the two most important benefits of outsourcing were 'guaranteed response times' and 'allowing in-house IT staff to concentrate on more strategic issues'.