Outsourcing Cost Savings Exaggerated
|Average cost saving from outsourcing of information technology and business services is around 15 per cent.
A survey by outsourcing advisory firm TPI found savings ranged between 10 to 39 percent, for an average of 15 percent, substantially lower than market claims of reducing costs by as much as 60 percent.
Duncan Aitchison, TPI’s managing director, said, “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. In our experience, outsourcing arrangements which focus solely on delivering huge savings often fail to meet client expectations.”
While cost reductions are the primary consideration for outsourcing, nearly one fifth of companies claim they do so primarily to improve quality.