Beware mega deals, says consultant

IT outsourcing "mega deals" with a single supplier are flawed and companies should look to sign contracts with a range of suppliers to minimise the damage if a deal goes wrong, according to Robert Fawthrop, former managing director of LogicaCMG's global outsourcing business.

"I think the days of the multi-billion-pound outsourcing deals ought to be numbered," said Fawthrop, who last week took over as chief executive of outsourcing consultancy Morgan Chambers. "It is a slightly flawed model. You are putting all your eggs in one basket and you are not allowing your in-house IT people to do what they do best."

Fawthrop said that although deals with multiple suppliers were harder to manage they delivered better value for money.

He added that a growing number of companies would outsource back-office processes and technology to shared service centres if the outsourced technology was not used to give the organisation a competitive advantage.

This has proved popular with banks and suppliers who have created joint venture companies to process cheques and other administrative functions.

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Rolls-Royce's mega deal success       

Rolls-Royce believes outsourcing mega deals can deliver hefty savings and adapt to meet business needs. 

Rolls-Royce IT director Luc Schmitz said the company saved tens of millions of pounds by halving the cost of its PC managed service unit under an outsourcing deal worth £1.3bn made with EDS in 2000. 

However, other large companies, such as Barclays Bank, have signed a series of smaller outsourcing deals with different suppliers.