December 5, 2003—With failing IT outsourcing deals in the news again, a UK research firm has studied the market and identified some of the problems which are just as relevant in FM outsourcing.
Leading IT market research firm Gartner says one key problem is economic pressures, on both companies and their decision-makers. This often leads to them rushing into outsourcing before they have thought it through.
Says Gianluca Tramacere, a Gartner analyst specializing in outsourcing in Europe: “Companies aren’t doing enough homework.”
The questions that need answers before placing any contract include: What are we outsourcing? Why are we outsourcing? How will we define success? “It may take time, but if you start outsourcing without outlining your strategy, you’re looking for trouble,” Tramacere says.
Businesses often focus on the short-term cost-cutting benefits of outsourcing, without realizing the process may actually mean having to take on extra people in order to ensure there are staff with the right skills to make the contract a success.
In a recent study, Gartner found that 20% of companies that outsourced IT work did not achieve any cost reductions. Over 9% experienced an increase in costs. Just 21% of the companies surveyed reported cost savings of greater than 20%.
Gartner’s Lily Mok commented: “There’s an assumption by many companies that they can save a large percentage of their budgets by outsourcing, however the true savings are not always as promising as one would expect. Many companies often neglect to factor in all costs associated with managing the outsourcing engagements, which average 4.5% of the total contract value and can be as high as 15%.”
For more information, contact Gartner.
Reprinted with permission; copyright 2003 i-FM
