Businesses do not know value of outsourcing

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Businesses do not know value of outsourcing

Karl Flinders

Businesses are throwing billions of pounds at IT outsourcing contracts despite having little understanding of what they spend or get for their money, according to research from Warwick Business School.

According to the research, which was sponsored by Indian offshore service provider Cognizant, only 8% of businesses knew how much money and time was spent on outsourcing contracts.

Over 263 companies were questioned across Europe, with revenues between $500m and $1bn.

Over half of these businesses did not even measure the financial benefits or disadvantages of the contracts they sign. Of those businesses that have tried to measure the financial benefits of outsourcing, less than 19% are very confident in their calculation.

And CIOs are not good at communicating the benefits of outsourcing, according to 67% of CFOs, said the research.

"The report flags a critical gap in managerial knowledge and some businesses clearly have to do better in justifying their significant outsourcing spend to the board, " said Julia Kotlarsky, associate professor of information systems at Warwick Business School.


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