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One in four does not save by outsourcing

Eighteen per cent of companies that outsource IT systems do not save any money as a result, and costs rise for 9% of firms,...

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Outsourcing

Eighteen per cent of companies that outsource IT systems do not save any money as a result, and costs rise for 9% of firms, according to a report by People3, part of analyst firm Gartner.

One of the main reasons for companies failing to cut costs through outsourcing is the extra expense of managing the supplier, the report said.

"There is an assumption by many companies that they can save a large percentage of their budgets by outsourcing some or all of their IT capabilities," said Lily Mok, senior consultant at People3. "However, these savings are not always as promising as one would expect."

Many firms overlook the cost of managing outsourcing contracts, which averages 4.5% of the total contract value and can be as high as 15%, she added.

Other costs faced by organisations outsourcing their IT that can be hard to quantify include: costs in time and effort when the service is being transferred, an increased turnover of IT staff, and lower staff morale.

Of the 76 firms surveyed, 21% reported savings of more than 20% from outsourcing.

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