Companies underestimate cost of offshore outsourcing

Companies looking to outsource applications, development and maintenance have not fully considered all the costs, according to...

Companies looking to outsource applications, development and maintenance have not fully considered all the costs, according to research by the Meta Group.

Meta surveyed 150 senior IT executives across Europe on the implications of outsourcing.

The survey found that 80% of companies had suffered problems and that about 30% had made no plans for the cost savings that they could make - even though more than half of the organisations surveyed had said cost had been the key driver.

According to Paul O’Neill, vice-president of Meta Group Europe, organisations have a habit of making decisions without considering all the consequences.

He said that they looked to move offshore because of cost savings but did not have a clue as to what level of savings they could actually expect.

The research showed that 80% of organisations have suffered problems ranging from time and cost over-runs, to non-adherence to specifications and requirements, when outsourcing applications, development and maintenance projects.

O’Neill identified several key areas, in particular, where organisations failed to plan properly.

"Companies have to be careful about giving away information about their business processes to a third party," he said, adding that it was not just a question of signing an outsourcing deal on its own, organisations had a lot of work to do non-disclosure agreements.

Too many companies believed the hype and thought they could achieve 40% cost savings when the real figure might be closer to 15%, he said.

  Maxwell Cooter writes for Techworld.com

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