BUSINESS
Outsourcing failures abound, experts say
20-11-2003
by
Half of all outsourcing contracts fail due to the client's inability to manage their service provider or because the client's requirements have changed.
This is according to experts who also said at the Gartner Outsourcing Symposium in Dublin that the rate of failure in outsourcing arrangements is a major industry issue. The symposium was co-sponsored by William Fry Solicitors, Accenture, Data Electronics and Eircom.
"Outsourcing contracts often have a term of between seven and ten years," said Stuart McLaughlin, director at Accenture. "But the IT requirements of companies have changed radically in the past five years."
He noted that in the past, outsourcing was perceived to be primarily of interest to large companies and since the Irish economy is characterised by small and medium enterprises, awareness has been minimal until recently. "We're noting a broader interest in outsourcing in Ireland," said McLaughlin. "Certainly outsourcing in Ireland is generating more interest that it would have two years ago."
McLaughlin reckons that Ireland could benefit from a one-to-many outsourcing arrangement. This is an arrangement whereby competitors in a particular industry outsource generic functions to a single outsourcing firm, thereby increasing the competitiveness of the entire industry. This could be effective regardless of whether the outsourcing referred to infrastructure, applications or business process services.
A report released by Gartner in October found that although outsourcing has become the business trend of choice among CEOs looking to save money, many companies who have outsourced areas of their business are not keeping enough relevant skills in-house to maintain quality control over their outsourcing arrangements. In the report Gartner estimated that badly-handled relationships were costing European businesses EUR6 billion a year in wastage.
Gartner recommends companies should be looking at spending five to 10 percent of the cost of an outsourcing deal on staffing a team charged with overseeing the processes and relationships with outsourcing providers.
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