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Get set for the outsourcing hokey cokey

Tales of soured outsourcing deals are prompting IT directors to consider hauling their IT operations back in-house, warns the National Outsourcing Association (NOA).

A 60% slice of the top UK outsourcing professionals questioned by NOA say that insourcing poses a major threat to outsourcing contracts.

The insourcing trend kicked off last year, when JP Morgan Chase announced it was cancelling its IBM contract and bringing its helpdesks back in-house. More recently, Prudential clawed back part of its IT operations from Capgemini.

But 30% of the respondents believe insourcing is simply a knee-jerk reaction to reports of crumbling relationships with vendors, and trouble with service level agreements and hidden costs, which have tarnished outsourcing’s reputation.

Better communications and evaluation are needed to prevent companies repeating these past mistakes and turning to insourcing, suggests NOA chairman Martyn Hart.

“To prevent this kind of major contract collapse, suppliers need to do all they can to avoid any kind of panic response,” he adds.

Companies like WHSmith, which has gouged out £18m from its cost base this year through major IT outsourcing and other efficiency measures, prove that outsourcing can reap substantial benefits.

Contract values have also taken a tumble, dropping by almost a quarter worldwide, according to outsourcing advisory firm TPI. The decline is even shaper in Europe, where the value of contracts fell by 37%, according to TPI.

Despite falling value, the research finds an11% rise in deal numbers, suggesting there is still plenty of activity in the market, but just fewer gargantuan deals.

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