Benefits of outsourcing "wildly exaggerated"

OUTSOURCING ADVISORY firm TPI has produced research that suggests that the cost savings outsourcers gain from the practice have been wildly exaggerated.

The research, which examined a bunch of outsourcing contracts awarded between 2003 and 2005, finds that "widespread market claims that outsourcing can reduce costs by over 60 per cent" are cobblers.

In reality, it reckons that savings net of professional fees, severance pay and governance costs average 15 per cent. It says the best savings firms can hope for are around 39 per cent.

In statement, Duncan Aitchison, Managing Director of TPI, says the research "proves that the promise of massive operational savings is unrealistic when you take into account the costs of procurement and ongoing contract management."

The company says that 2006 has so far seen the largest number of outsourcing contracts ever signed in the first quarter of the year. It values the 83 contracts signed so far this year at over €18 billion. The main beneficiaries of such outsauce are IBM, EDS and T-Systems. µ

L'INQ
www.tpi.net