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I.T. Outsourcing: Expect the Unexpected

By Allan Alter  |  Posted 03-07-2007 Print

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Outsourcing should save money—but it usually doesn't. And that's not the only bit of conventional wisdom that has outlived its usefulness.

Outsourcing may be commonplace, but it continues to confound IT executives' expectations. Take the common myth that companies outsource to save money. Not only is this not true in half the cases, but our survey shows that most companies aren't saving money by outsourcing.

And that's not the only surprise: Insourcing and outsourcing, though polar opposites, are both on the rise. Companies spend more on offshore vendors than domestic ones, despite problems with quality and delivering return on investment. Dissatisfaction with outsourcing vendors is widespread, yet most of the 401 IT executives who took our survey blame their own companies most of all for the disappointing performance of their vendors. Though outsourcing is directly responsible for layoffs, it's not as disruptive as it was last year.

Should our findings cause concern? After all, no more than 29 percent say they are dissatisfied with any of the 11 outsourcing activities we tracked. Still, our research suggests that outsourcing is providing less value than it should due to mediocre management by outsourcing customers and poor performance by vendors. That explains why satisfaction with outsourcing is lukewarm and not enthusiastic. But there's a silver lining: If outsourcing isn't saving money, it also could mean CIOs are efficiently running their IT organizations.



 

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