Outsourcing adds cost warns report

A survey by law firm Denton Wilde Sapte has found that a noticeable majority of outsourcing deals, 66%, fail to deliver the benefits promised.

A survey by law firm Denton Wilde Sapte has found that a noticeable majority of outsourcing deals, 66%, fail to deliver the benefits promised.

The report comes at a time when it is estimated that nine out of 10 companies outsource some aspect of their business, typically IT support or call centre functions.

Despite cost reduction being the prime motivator for outsourcing, the 100 survey respondents cited higher costs as the chief disadvantage of outsourcing. A commanding 72% of companies were worried about the flexibility of their contract.

“This should provide a wake-up call to outsourcing service suppliers,” says the head of the firm’s technology, media & telecoms sector John Worthy.

“Customer expectations would be better met by shifting the focus of outsourcing deals towards more business-oriented key performance indicators, and ensuring that the deal supports the business relationship effectively.”

A separate IDC survey shows that a number of smaller, specialist outsourcers are challenging the big players with competitive pricing and technology in niche areas.

Companies such as Dell, specialising in desktop management, and Lucent Technologies with its network management expertise are winning customers.

Salesforce.com, which exploits the internet to deliver hosted applications is also gaining ground, together with internet powerhouses Google, AOL, Amazon.com and others delving into “on-demand” business services.

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