Outsourcing of information technology and business services delivers average cost savings of 15 percent, a survey found on Thursday, disproving market claims that outsourcing can reduce costs by over 60 percent.
After professional fees, severance pay and governance costs, savings range between 10 percent and 39 percent, with the average level at 15 percent when contracts are first let, according to outsourcing advisory firm TPI.
“This research proves that the promise of massive operational savings is unrealistic when you take into account the costs of procurement and ongoing contract management,” Duncan Aitchison, TPI’s managing director, said in a statement.
“In our experience, outsourcing arrangements which focus solely on delivering huge savings often fail to meet client expectations,” he added.
Cost reduction remains the primary motivation behind current outsourcing contracts, but an increasing number of companies are outsourcing primarily to improve quality, at 21 percent now versus 11 percent in 2004.
Quality? Yeah — that’s what he said. That still leaves 79% sleazy cheapskates who think saving 15% makes up for mediocrity!
Doesn’t surprise me.
Outsourcing, in particular offshore outsourcing, always lowers quality.
The greedy corporations may save money, but they piss off the public, lose control of process, and veer far from Deming’s ideal of continual improvement.
What’s wrong with trying to save some money? Do you always pay 15% more for everything you buy?
I’ll pay a great deal more for a quality product. The best you can hope for if you out source IT is mediocrity. So, if your company thinks mediocrity is all that’s necessary then go for it.
Vasper, You are on target, but 99% of America don’t have a clue what you are talking about. Sheesh, even the ASQ has veered away from him.
AB CD
Yup, you save a nickel but it costs you a dollar in lost sales. The cheapest price is seldom the best price.
You don’t think the companies can figure that out by themselves?
Dvorak has been saying American workers are too dumb to do well at technology anyways.
Hey jerk, I mean ABCD — EXACTLY and I mean EXACTLY where do I say Americans are too dumb to do well at technology?
Your posts and nutty accusations are getting a little out of hand.