Companies aim too low on outsourcing

Companies are still failing to attain crucial non-financial benefits in outsourcing despite 89% of outsourcing activities achieving a return on investment of more than 25%, new research has found.

Deloitte's 2008 outsourcing survey revealed that executives were still missing out on achieving strategic benefits with only 37% of executives saying a primary driver in their decision was to improve customer value, and 27% said they hoped to gain competitive advantage through outsourcing.

Respondents also said they were dissatisfied with their outsourcing provider's ability to bring any continuous or significant changes in strategy, process or use of technology. Dissatisfied executives in the survey noted underestimated scope, higher-than-expected costs, poor quality communications, poor service, and poor reporting from their service providers.

The survey found that 64% of executives polled said cost reduction was their primary motive for their largest outsourcing contract, with access to technology expertise coming in a close second with 56% of executives citing it.

Peter Moller a partner in the firm's consulting practice said: 'The true potential of outsourcing is not being achieved and we are still seeing a focus on a narrow remit of labour arbitrage and cost reduction. Overall our survey shows that the emphasis on cost reduction and access to a vendor’s skilled workers reveals a procurement-oriented mind-set that takes a narrow view of the potential benefits of an outsourcing relationship. In short, companies are aiming too low.'