Strengths and Weaknesses of Outsourcing

April 10, 2008
Deloitte survey reveals sweet spots and pain points

A recent Deloitte survey revealed many positive findings among outsourcing contract holders, including high satisfaction rates and, in general, achievement of ROI in the specified timeframe. However, a number of negative issues and trends surfaced during the survey as well, as outlined in the survey results.

"Our findings were striking -- fully 83% of all respondents reported that their projects had met their ROI goals of slightly above 25%," asserts Paul Robinson, principal
global leader fo technology. "Despite this apparently positive result we believe that the true potential of outsourcing is still not being fully achieved. Not only had the great majority of the respondents achieved their ROI goals, but a majority (70%) stated that they were 'satisfied' or 'very satisfied' with their arrangements -- the highest level we have ever seen reported."

However, the survey also highlighted some lowlights of the global outsourcing game, among them:

  • 39% of the 300 respondents reported that they had terminated at least one outsourcing contract and transferred it to a different vendor in their careers and, of those who reported that they were Dissatisfied or Very Dissatisfied with their largest contract, fully 50% had brought the function back in-house.
  • 61% reported that they had escalated problems to senior management in their contract's first year, with 15% reporting five or more such escalations.
  • 53% continued to have to escalate in the second year.
  • Only 34% of the executives reported that they had gained important benefits from innovative ideas or transformation of their operations
  • 35% of executives, including 55% of executives who were not very satisfied with outsourcing, wished their companies had spent more time on vendor evaluation and selection

Asked what they would do differently if they were able to start their outsourcing projects over, 49% of the executives surveyed said they would define service levels that aligned
better with their companies' business goals.

The dissatisfied respondents noted underestimated scope; higher-than-expected costs; and poor quality communications, service, and reporting from their service providers.

For a full link to the study, click here.

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