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Conflicting Outsourcing Studies Issued

Two studies have found disparate satisfaction levels among companies that have outsourced operations.

Friday, July 1, 2005
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Many of the world's largest organizations that embraced information-technology and business-process outsourcing are bringing operations back in-house and exploring alternatives, according to recent study from Deloitte Consulting.

The study, Calling a Change in the Outsourcing Market, surveyed executives from 25 large companies representing a variety of industries. It found that 70 percent of participants have had "significant negative experiences" with outsourcing projects and that one in four (25 percent) are bringing formerly outsourced operations back in-house because they determined those operations could be performed more successfully and/or less expensively by internal staff.

Meanwhile, a survey from consulting and outsourcing firm Hewitt Associates found 89 percent of respondents from 129 large companies are satisfied with their HR outsourcing arrangements.

The study found respondents plan to expand their outsourcing into the following areas within the next three years: leave management, learning and development, payroll, recruiting, health and welfare, and global mobility.

Not all was rosy in this survey, either: Almost one-quarter (23 percent) of the participants reported bringing an outsourced function back in-house, with 62 percent citing poor service as the reason and 38 percent citing unrealized cost savings.

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The Deloitte study also cited cost as a major reason for participant dissatisfaction.

Almost six in 10 (57 percent) of participants reported absorbing costs for services they believed were included in their vendor contracts. More than eight in 10 (81 percent) said they had little or no visibility into their vendor's pricing and cost structure.

"Outsourcing vendors and companies may have conflicting objectives, putting at risk clients' desires for innovation, cost savings and quality," says Ken Landis, senior strategy principal at New York-based Deloitte Consulting.

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