Share benefits of outsourcing

Over the last 10 years the outsourcing industry has gone from strength to strength. The mega deals have got bigger, particularly...

Over the last 10 years the outsourcing industry has gone from strength to strength. The mega deals have got bigger, particularly in the financial services sector, as companies have eagerly handed over their IT systems to outside suppliers.

But despite the outsourcing boom there is still widespread scepticism among IT decision makers over the exact business benefits that outsourcing can deliver.

That may be about to change. The groundbreaking survey of the outsourcing activity of every FTSE 100 company over the past five years, conducted by Computer Weekly's online portal, in conjunction with Morgan Chambers, has found that well-managed outsourcing deals can boost a company's share price by an average of 6% compared to rivals' stock in the same sector.

With the economic downturn showing signs of snowballing into recession, evidence that outsourcing can add significant value to a business should be welcomed. In the past, outsourcing deals have largely been justified as a way to cut the cost of running a system or service. On the evidence of this latest piece of research, IT managers can afford to paint a more positive picture when arguing the business case for outsourcing.

Of course, IT managers should still treat outsourcing with caution. The list of abandoned and disputed contracts is a long and depressing one, spanning organisations from both the public and private sectors.

Moreover, the labyrinthine nature of modern contracts and their limited flexibility can easily trip companies up - witness the cancelled £124m deal between insurance giant CGNU and IBM earlier this year.

Outsourcing may provide a wider value to the business than previously thought, but the industry still has plenty of room for improvement.
This was last published in October 2001

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